18 January 2022 
Andrea Marshall, Tax Specialist
City YMCA London [2022] TC08351 is an interesting case in that it explores what is accommodation similar to that of a hotel, etc and the application of "the 28-day rule".
City YMCA operated two hostels in London that was specifically for young homeless people. This case considers whether City YMCA provided accommodation similar to that of a hotel, that was eligible for reduced value once the young person had been in occupation for more than 28 days. The benefit to City YMCA was that it was able to reclaim VAT incurred on costs, but after 28 days, approximately 80% of its income was not subject to VAT. (Please see section 3 of Hotels and holiday accommodation (VAT Notice 709/3) for the relevant HMRC guidance).
Funding for the overnight charge came predominantly from housing benefits and young people were assessed in order to qualify for the accommodation. When allocated accommodation, a contract was entered into between the young person and City YMCA. The young person received an allocated room (which could be changed during their stay, in exceptional circumstances), continental breakfast, and access to communal facilities including a laundry, kitchen and TV room. City YMCA could access the allocated room in order to carry out, for example, maintenance work.
HMRC had previously ruled in 2011 that the accommodation was similar to a hotel, etc, but revisited this ruling in 2019. In the FTT case, HMRC argued that City YMCA was not granting any ‘interest in or right over land or licence to occupy to land’, so the 28-day concession could not apply, and all income was standard rated. Alternatively, the supply was not similar to a hotel and was therefore exempt.
The FTT held that the accommodation provided to homeless young people was a licence to occupy sleeping accommodation and, therefore, a similar establishment to a hotel, inn or boarding house. The charity’s supplies were therefore standard rated but, given that the majority of the young people stayed for more than 28 days, qualified to be reduced in value.
