5% VAT on Hotel and Holiday Accommodation: an Isle of Man Rate the UK Doesn’t Have
On the Isle of Man, VAT on hotel and holiday accommodation is charged at the reduced rate of 5%, not the standard 20%, under the Treasury's current notice dated July 2024 (checked 14 September 2026) (Customs and Immigration notice). That covers hotels, guest houses, holiday lets, campsites and caravan pitches. The UK has no equivalent: under UK rules (HMRC), hotel and holiday accommodation has been standard-rated since 1 April 2022 (GOV.UK). Pages from 2020 about a "temporary 5% rate" describe a Covid-era cut for food and attractions that has ended; the accommodation rate is older and still applies. Meals outside a bed-and-breakfast tariff, drinks and extras stay at 20%, so the invoice has to show the split. For registration and other rates, see our guide to VAT on the Isle of Man.
What VAT rate applies to hotel and holiday accommodation on the Isle of Man?
Hotel and holiday accommodation on the Isle of Man is charged at 5%. The July 2024 notice says a supply of accommodation in a hotel or similar establishment "is liable to a reduced rate of VAT", and its worked examples use "a reduced rate of 5% VAT and a standard rate of 20% VAT" (checked 14 September 2026) (Customs and Immigration notice). gov.im's VAT page, checked the same day, still lists that notice as one of the cases where "some rates of VAT that apply in the Isle of Man are different to the rate charged in the UK" (Isle of Man Government).
The law behind it is Schedule 1 to the Value Added Tax Act 1996. Its Group 8, "Supply of sleeping accommodation", covers accommodation in hotels, guest-houses or hostels, self-catering holiday dwellings, holiday or recreation camps, caravan sites and camp sites, including pitches, "situated in the Island or the territorial waters adjacent to the Island" (consolidated text archived June 2024) (Value Added Tax Act 1996).
The rate is not new. HMRC's Isle of Man VAT manual says the Island's rate on hotel accommodation, holiday accommodation and camping sites "was reduced to five per cent with effect from 1 October 1994" (HMRC). That is HMRC describing the Manx difference; the Manx rule itself sits in the Act and the notice. The notice is issued as Customs and Immigration, while gov.im's VAT page names the Treasury's Customs and Excise Division: both mean the Island's VAT authority, and neither is HMRC.
What counts as accommodation for the reduced rate?
Rooms, holiday lets and pitches count, and timeshare does not. The table quotes the July 2024 notice on each supply (checked 14 September 2026) (Customs and Immigration notice):
| Supply | 5% rate? | What the notice says |
|---|---|---|
| Room in a hotel or similar establishment | Yes | "accommodation in a hotel or similar establishment" |
| Holiday lets and self-catering | Yes | "self-catering, holiday flats and similar accommodation" |
| Campsites and caravan parks | Yes | "including the pitch rental" |
| Bed and breakfast sold as one tariff | Yes, on the whole tariff | "the breakfast being seen as incidental" |
| Timeshare | No | "does not however include the provision of timeshare accommodation" |
A deposit follows the room. VAT on a deposit is charged "at the same rate as the accommodation" until the stay takes place, and any meal element is then split out as the next section explains. The notice is addressed to "anyone who makes supplies of accommodation or other services in the hotel and holiday sector in the Isle of Man", so a VAT-registered owner of a single holiday flat follows the same notice as a hotel.
If your tariffs mix rooms, breakfasts and extras, we can set up the VAT codes and invoice layout for you.
Get a QuoteWhat stays at 20%?
Catering outside a bed-and-breakfast tariff, extra services and rooms resold by a travel agent outside the Tour Operator's Margin Scheme stay at 20%. According to the July 2024 notice (checked 14 September 2026) (Customs and Immigration notice), breakfast supplied in any other tariff or meal arrangement, or charged separately, "is a supply of catering" that "must be subject to VAT at the standard rate". With self-catering, "if any additional services are provided then these would be subject to VAT at the standard rate". Dinner for a guest on bed-and-breakfast terms, drinks and telephone charges carry VAT on top of the tariff, and a supply of Island accommodation by a travel agent outside that scheme "will also be standard rated".
Half board and full board sold at one price have to be split. Only the accommodation element takes the reduced rate, the balance is standard-rated, and the catering share "should normally be not less than 35%" of the inclusive tariff, or the actual charge for catering if that is higher. The notice's own example splits a £100 VAT-inclusive dinner, bed and breakfast bill like this, taking the VAT out of each VAT-inclusive amount with a 1/6 fraction at 20% and 1/21 at 5%:
| Part of the £100 bill | VAT-inclusive amount | VAT included |
|---|---|---|
| Catering (35%) | £35.00 | £5.83 (1/6, at 20%) |
| Accommodation (the balance) | £65.00 | £3.10 (1/21, at 5%) |
| Whole bill | £100.00 | £8.93 |
The split has to show on the invoice. Every tax invoice must show the total VAT charged and "state clearly" that the reduced rate applies to the qualifying element, and the notice rules out the less detailed and modified invoices described in HMRC Notice 700. On the return, the VAT-exclusive value of reduced-rate supplies goes in Box 10 and the VAT in Box 1, alongside any other VAT due. Our guide to filing an Isle of Man VAT return covers deadlines and the portal.
For long stays, the notice defers to HMRC. It says the calculations for VAT due from the 29th day of a stay of over four weeks "remain unaltered" and points to HMRC Notice 709/3. That notice says that from the 29th day of a continuous stay in a hotel or similar establishment, VAT is charged only on the part of the payment that is not for accommodation, with at least 20% of the remainder treated as facilities, and that this rule "does not apply to holiday accommodation" (GOV.UK).
If a board tariff or a long-stay booking leaves you unsure which rate goes where, ask us before the invoice goes out.
Free AdviceHow is this different from the UK?
Unlike the Island, the UK charges hotel and holiday accommodation at the standard rate. Under UK rules (HMRC), the temporary reduced rate for tourism and hospitality ended on 31 March 2022, and from 1 April 2022 "VAT should be charged at the standard rate" (GOV.UK), which HMRC gives as "currently 20%" (GOV.UK), both checked 14 September 2026. HMRC Notice 709/3, last updated 5 August 2022, dates that UK relief as 5% from 15 July 2020 to 30 September 2021, then 12.5% from 1 October 2021 to 31 March 2022.
The Island followed that Covid measure for food and attractions, not for rooms. Announcing the cut on 8 July 2020, the Treasury said "A 5% VAT rate already applies to accommodation in the Isle of Man" (Isle of Man Government). On 6 August 2021 it announced that the temporary rate for catering and admission to shows and other attractions would increase "from 5% to 12.5%" on 1 October 2021 and "remain in operation until 31 March 2022" (Isle of Man Government).
So the 2020 pages about a temporary 5% describe a catering cut that has ended, while the accommodation rate predates it and appears in the current notice. If a VAT-registered Island hotel bills a UK visitor 5% on the room, that is the Manx rate, not an error.
Do you have to register?
You have to register when your taxable supplies pass £90,000 in the previous 12 months on a rolling basis, when you expect more than £90,000 in the next 30 days alone, or in a few other cases such as taking over a VAT-registered business as a going concern (checked 14 September 2026) (Isle of Man Government). Rooms and lets at 5% count towards that figure, because gov.im treats supplies at the standard, reduced or zero rate as "taxable supplies" (Isle of Man Government).
A guest house or holiday let that is not registered charges no VAT at all, because gov.im says "you cannot charge VAT if you are not VAT registered". After applying, you cannot add VAT to invoices until your VAT number arrives, although gov.im says you can raise your prices to cover the VAT you will owe. You can also register voluntarily below the threshold, and our guide to VAT on the Isle of Man sets out the other triggers.
Registration, returns and the rest of the filing calendar sit within our Isle of Man compliance service, so if your bookings are close to the threshold, we can take VAT off your list.
Get a QuoteFrequently asked questions
Is there VAT on holiday accommodation? On the Isle of Man, yes, when the provider is VAT-registered: holiday lets, self-catering, campsites and caravan pitches are charged at the reduced rate of 5%. A provider who is not registered cannot charge VAT.
Do hotels charge 20% VAT? Not on the room on the Island, where hotel accommodation, including a bed-and-breakfast tariff sold as one price, is charged at 5%. Other meals, drinks and extras are charged at 20%, and in the UK the room itself is standard-rated.
Can I claim VAT back on accommodation? If your business is VAT-registered, gov.im points you to HMRC's guide on charging, reclaiming and recording VAT, which says you can reclaim VAT on items bought for use in your business, only for the business proportion and with valid VAT invoices (GOV.UK). The VAT to claim is what the invoice shows, which on an Island bill may be split between 5% on the room and 20% on meals or extras.