Glamping – what is the tax treatment?
Statistics produced by the Tourism Alliance (whose members include the British Hospitality Association ABTA) show that Brexit has resulted in increased income for UK “staycations”. With a positive hot summer in the UK and a fall in the value of the pound since the Brexit vote making holidays more expensive for Britons travelling abroad, the growth in UK tourism is something that diversified farms should take advantage of.
The first question to be asked on seeing this title is perhaps “what is glamping?” It might come as a surprise to learn that the answer is the quite unusual portmanteau of glamour and camping taking place on a farm. The next question that might be asked is “on what planet could any form of camping, especially on a farm, be glamorous?”
Logic aside, glamping is a prosperous and popular form of farm diversification but one which can raise a number of tax concerns. The first concern that must be addressed is to establish what form of glamping is under consideration as this will dictate the tax treatment.
The recent case of J Nott TC4897 considered the question of whether lettings income from holiday cottages was property or trading income. Such a case encompasses a lot of current HMRC focus on the status of property income and their aggressive approach in seeking to classify such income as being derived from property and not a trading activity.
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Many would argue that the very title of “glamorous” indicates a good quality of service, although it could also indicate a glamorous location or combination thereof. Glamping can involve yurts, tipis, pods, bell tents, shepherds huts, gypsy caravans, tree houses and a number of alternatives. Glamping is considered to be camping with amenities and in some cases with the provision of “resort style” services. It is aimed at combining the luxuries of hotel accommodation with escapism and the great outdoors. Some glamping can be to provide the ‘rich and the famous’ with prestigious glamorous camping for the English festivals away from (but local to) the festival sites with butler service and a limousine transport service. At the other end of the scale, glamping can be about sustainable, quasi-outdoor lodging that offers a comfortable experience on a farm or in other rural surroundings.
Where such glamping activity involves letting out holiday accommodation rather than operating a trade, the furnished holiday accommodation tax questions arise. It is reasonable therefore that the tax treatment must be assessed on a case-by-case basis with guidance from recent tribunals on the general principles of service and what structures are provided. In many situations glamping involves extensive food service and regular fresh bed linen.
These are exactly the questions that have to be asked to ascertain the correct tax treatment of the glamping operation. Any farm that has diversified into glamping will have to ensure that the services are similar to a hotel if the income tax loss relief and the IHT relief are to be achieved. The inclusion of breakfast not as an option is a serious consideration to help with tax efficiency.
The tax treatment of the whole operation must therefore be considered “in the round”. It must be established whether the premises/mobile accommodation qualifies for capital allowances and if the accommodation can qualify as assets which can be used for rollover relief. The question of the nature of the trade versus accommodation must be considered when considering how the profits are shown on the tax return and whether losses can be offset sideways. Emphasis should be placed on whether the additional services to make the camping glamorous are due to location and setting, eg swimming pool, or due to the services provided, eg daily cleaning, breakfast and other meals, a fully stocked fridge that would meet the criteria set by “Absolutely Fabulous” etc. In order to qualify as a trade, the glamping brochures must clearly evidence that the special services provided are over and above that of accommodation for the glamping to qualify as a trading activity.
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