Homeless hostel too comfortable says VAT man

Reading the recent issue of Roof Magazine, I came across this utterly bonkers decision by the VAT authorities.

Byker Housing Association has built a new 31 bed hostel for the homeless in Newcastle – however the VAT authorities have deemed it to be a commercial building (i.e. a hotel) rather than a residential one - because it is too comfortable! This means that it becomes liable for VAT of £315,000 – which will put Byker Bridge out of business.

Under the VAT rules, hostels should be exempt from VAT if they are for a residential use, designed as a dwelling, or used for a relevant charitable purpose. Despite this, because the VAT office does not have a workable definition of a homeless persons hostel, and because the new hostel is quite nice, they are treating it as if it were a hotel for tax purposes. Even though the building was partly developed with Housing Corporation finance which is only available for non commercial ventures!

Hopefully this decision will be set aside. Otherwise Byker Bridge will go out of business, there will be 1,500 per year more homeless on the streets of Newcastle, and it will have a knock on effect on other registered social landlords developing homeless hostels