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A win in the First Tier Tax Tribunal for City YMCA London

Our Technical Director, James Hurst, reviews the First Tier Tax Tribunal for City YMCA London.

The appellant, City YMCA London (“CYL”), argued that its supplies of hostel accommodation fell under the ‘reduced value of supply rule’.

The ‘reduced value of supply rule’ applies to supplies which fall under Item 1(d) of Group 1 of Schedule 9 to VATA 1994 (supplies of sleeping accommodation in a hotel, inn, boarding house or similar establishment), where that supply is made to an individual for a period exceeding four weeks.

Under the rule the accommodation is subject to the standard rate of VAT for the first four weeks but is then effectively zero-rated for the remaining duration of the stay.

HMRC put forward two arguments in opposition to this; firstly, they argued that CYL’s supplies did not fall within Item 1 at all because there was no ‘exclusive possession of the property’ which would mean there was no ‘license to occupy the land’. Secondly, they contended that even if there was a ‘license to occupy land’ that CYL’s hostel was not a ‘similar establishment’ for the purposes of Item 1(d).


The Tribunal agreed with CYL and held that their supply did constitute a ‘license to occupy land’ and that the hostel was a ‘similar establishment’ to a hotel for the purposes of Item 1(d). Accordingly, this meant that CYL could benefit from the reduced value of supply rule and, although not mentioned in the case, would have enabled them to apply the temporary reduced rate of VAT introduced to help the hospitality sector during Covid.

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The decision of the FTT is welcome news to all hostels and potentially other types of establishments providing accommodation. Please get in touch if you want to discuss this decision further and to see if it could benefit your organisation.

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