HRG has warned travel managers in the United Kingdom
to analyze their travelers' card statements to ensure hotels no longer are charging
them 20 percent value-added tax for no-show fees. Her Majesty's Revenue &
Customs recently changed its guidance to say that VAT is not applicable for no-shows,
but not all hotels are aware of the change, said HRG director of taxation Chris
Gibson.
According to Gibson, hotels traditionally
charged VAT on no-shows because, they argued, they have provided the service as
the reservation contract has not been canceled. Now HMRC has said VAT should
not be charged other than when the hotel guaranteed a specific room for a
customer, such as a presidential suite.
The new guidance will save money for those
groups of corporate clients that are unable to recover VAT on their expenses,
including banks, insurance companies, government departments and charities.
However, said Gibson, "the change has not been well-publicized, and there
seems to be a mixture of hotels which know about it and those which do not. If
we as a TMC are handling our clients' hotel invoice settlement through a bill-back
situation, then we can point it out to hotels, but we have no way of being
aware for other transactions, so travel managers will have to check what
appears on their travelers' card statements."
As an added complication, said Gibson,
companies cannot recover VAT if it has been incorrectly charged by a supplier.
It becomes a contractual issue, which the client has to resolve with the hotel,
not HMRC.