I'm not sure, but I would presume that what they charge for cancelling less than 2 weeks before arrival, will be determined by the cancellation charges in their terms and conditions. I don't know about the vat, but I am pretty sure the last time I had to cancel a holiday, the vat was included.

Did you book direct through the hotel or through a company? Have you asked if they'd let you transfer the booking to another date? Unfortunately if it states on your confirmation that if you cancel after 1st December you will lose the full amount I can't see a way of getting round that.

Whilst it is all a matter of what is included in the T&Cs have you spoken with the hotel? It is a busy time of year so it is possible that they may be able to resell your booking and threfore mitigate their loss.

fwh

Thanks folks,
we booked direct with the hotel by phoning after seeing a newspaper advert. Over the weekend tried phoning but no luck and I don't think they open for Christmas. It is a small family run business and I think they may take their own holidays at this time of year.
There were no T & C as such. The confirmation was a photocopied letter with the dates hand written and the type of room handwritten down the side margin.
The cancellation clause was also hand written at the bottom of the page. I fully accept that it is not the hotel fault we are unable to go but really would like to know the position regarding the VAT.
As I understand it, Vat is chargeable at the point of supply and if there is no "supply" Vat would not be chargeable. Can anyone help on this point, please.

Helen

There is a supply element of the room if it has been let but not occupied. Items such as food and drink which may be included in the price but are not supplied cannot attract VAT. Handwritten T&Cs such as you describe have little or no value. Yes they can set a cancellation charge but they would need to be far more detailed. You have rights also should they fail to deliver what has been promised and they should be set down in writing.

fwh

If there was no supply (an empty room waiting for you might count as a supply) then anything they charged for cancelling would be an admin fee. So, there's a new question -are admin fees VATable? Anyone from HMRC able to clarify that? Because if admin fees are not VATable and this room is relet then the cancellation charge shouldn't include it.

But if they are VATable it raises an interesing point - if you book a flight it's not VATable - but if it's a UK airline, you cancel in advance and they keep your money but resell the seat they would owe the state some money!

From HMRC website.

7.2 Cancellation charges

If you make a cancellation charge to a guest who cancels a booking, no VAT is due on the charge because this is your compensation and not a taxable supply.

If, however, you arrange or provide any guarantee or insurance against your guest having to pay cancellation charges, the charge you make for this is standard-rated. Any commission you receive from a person permitted to carry on an insurance business under Section 2 of the Insurance Companies Act 1982 is exempt.

obviously my patience with the HMRC website ran out sooner than yours!

Going back to the OP's problem. This implies that it doesnt matter whether the room is relet or not, even if it isn't they are claiming compensation rather than charging for an used service so they can't ask for the VAT. The next question is the rate - VAT goes up to 20% on January 4th so if they send a cancellation invoice after that which says "inc VAT" then you could deduct the new amount which will be 16.66% (one/sixth) of the inclusive price.

Surely they are saying that the total cost includes VAT. But if you cancel you lose the full amount. Which I read as the full amount being a cancellation charge. Which makes the VAT irrespective, as they are not saying they are charging VAT on the cancellation?

However, the way I read it is that you have only paid a deposit. And so if they would have to chase from you the balance, and being a 'small family business' they probably would not have the ability or desire to do this, irrespective of the morality. If they did it would be well within their rights, and the need to find a loophole just reflects badly on the fact that you didn't purchase insurance (which I wouldn't have for a UK break either).

My question is - what would happen if you did nothing?

You're quite right in your logic, they could say the cancellation charge is more than the original price and pocket what would have been the VAT. But I think they really would have to say that before you booked. And if a small B&B wasn't VAT registered there would be no difference.

As for what happens if the OP doesn't pay the difference, if they already have a credit card number they could charge it but I agree they probably won't chase it if the deposit was paid by cheque.

I wouldn't push the matter on VAT personally. Their Ts and Cs say that any cancellation after 1st December would be a full charge so they could argue back that the supply of the room is as, though the room being unoccupied.

Basically, you are going to reply on their good nature for you to cancel and "only" lose the deposit. Arguing the point about the relative small amount of VAT may just pee them off and refuse the request to lose the deposit only on such short notice.

Mark

I do not want to "do" the hotel out of anything they are entitled to. but the VAT is paid to HMRC and not the hotel owners and although £73.50 may be peanuts to some people and in comparison to the total cost of our break, £670, including travel, is relatively little, as disabled pensioners it all counts.
I have now managed to contact the hotel owners and they say the FULL amount is payable but if we can find replacement guests they can take our place.
I am being serious here, not sarcastic, can anyone supply a contact number for the Big Issue in Blackpool. Someone, anyone, may make use of our money rather than food being thrown out

If the full amount is payable they are effectively providing the service paid for, eg the room. The question of the VAT doesn't come into play. They have provided the service, it being the room though unoccupied.

Mark

Helenc - Why not try and contact a local radio station in Blackpool and see if they know of some derserving case to take your break ? Would make you feel a little better?

Mark

The view of HMRC regarding the VAT has already been posted - they say VAT isn't payable because they class cancellation charges as compensation not supply.

There is another side to this. The OP did not have insurance. Our annual policy covers us for the UK as well as our trips to warmer (very desieable at present) climes.

fwh

they say VAT isn't payable because they class cancellation charges as compensation not supply.

But I don't think that this necessarily means that a guest who cancels is automatically entitled to a refund on any VAT component of the original charge. The hotel can set the compensation at whatever level they want - some set it lower than the original cost if sufficient notice is given - but the fact that the cancellation/compensation charge is exactly equal to the cost of the room +VAT doesn't mean that the guest can claim back the equivalent of what the VAT would have been because no VAt has in fact been levied as far as HMRC is concerned.

SM

The VAT element only enters into the equation once the transaction is completed. The deposit does not attract VAT until the customer takes delivery. In effect it is held in escrow pending the transaction. HMRC have decided that in cases such as this then VAT does not apply. Because the OP has entered into a contract that if they do not take up the booikng they will be liable for the full charge then the quetion has been asked. It could also be considered that the percieved VAT element could be considered compensation for loss of other income the hotel may have expected to gain if it had not been cancelled. I doubt the question would have arisen if the OP had been claiming on insurance. Once again as we keep saying on HT the T&Cs are all important although I find a hand written note not a very satisfactory way of applying them.

fwh

To Denny.53
Thanks for your suggestion. I tried phoning Radio Wave which I understand is the local Blackpool radio station but did not get any reply on the phone and than emailed on a form on their 'Contact Us.' page but did not get any reply. However I have paid the holiday in full and now found 2 deserving people to take our place.
Just a wee bit miffed that it has cost us almost £600 and that there would have been no reduction in the cost for VAT which I still don't believe would have been payable or even a small reduction for the cost price of the food even if there was an element of charge from the profit on the food.

.As far as insurance goes, we no longer go on holiday so have not needed Annual Insurance and because this was a fairly local holiday and when I got quotes they wanted on average an extra £30 for the 3 nights because I have psoriasis (non visible) n the event it my husband who is ill.

At least someone else is getting something out of our stupidity, even though an expensive lesson for us.