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VAT on accommodation as part of welfare services

Kieran Smith, Director, VAT and Customs Duty services
11/03/2021
Lady seated at desk
The Lilias Graham Trust (LGT) Upper Tier Tribunal decision and its impact

Background

LGT recently lost its Upper Tier Tribunal case in which it argued that the accommodation it provides was not covered by the welfare exemption and so should have been subject to VAT at the standard rate.

LGT argued that VAT was applicable to the accommodation services because applying the standard rate would improve LGT’s VAT recovery position, as exemption does not allow recovery of VAT on costs associated with those supplies.

Who this affects

The case potentially affects all care providers that offer accommodation as part of their package of care services.

The decision

The decision states that the accommodation could not be disaggregated from the supply of the welfare as this was not a discrete supply – it was essential to the care services being provided.

Therefore, this decision confirms both:

  • exemption being applied to services directly connected to welfare services provided by charities and regulated providers (i.e. where the overarching care is treated as exempt)
  • VAT at 20% being applied to services in cases where providers of care services do not qualify for exemption. For instance, when a wholly owned trading subsidiary is used in order to provide standard rated welfare services to improve VAT recovery on costs. 

Further information on applying VAT to welfare services is available here.

Care providers often provide accommodation to users in order to facilitate their care, this can take many forms, e.g. residential care or supported living, and so this case does lend clarity to the position with regard to these supplies.

Should you have any queries, please get in touch with Kieran Smith, Robert Warne or your usual Crowe VAT contact.

Insights

MTD: what non profits need to do and by when.
The issue and some possible solutions for the impact of COVID-19 on VAT recovery for charities.
Our VAT team outline the benefits using subsidiary companies to provide welfare services.
The provision of welfare services by a charity or CQC-registered provider is exempt from VAT.
MTD: what non profits need to do and by when.
The issue and some possible solutions for the impact of COVID-19 on VAT recovery for charities.
Our VAT team outline the benefits using subsidiary companies to provide welfare services.
The provision of welfare services by a charity or CQC-registered provider is exempt from VAT.

Contact us

Robert Warne
Rob Warne
Partner, Head of VAT and Customs Duty services
London