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Specialist accounts, TOMS and payroll for hotels, B&Bs and guesthouses.

Hotel and guesthouse finance is driven by rooms revenue, departmental cost control and a VAT regime that changes character when you package bought-in travel elements. The Tour Operators' Margin Scheme applies to any operator bundling accommodation with bought-in transport or other travel services, not only dedicated tour operators. Add occupancy-led staffing, OTA commission reconciliation and capital allowances on refurbishment, and you need an accountant who understands how accommodation businesses actually generate and spend money.

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10.5%
VAT Flat Rate Scheme sector rate for hotels and accommodation businesses including B&Bs, guesthouses, motels and self-catering
£7,500
Rent-a-Room relief per year for B&B and guesthouse owners letting rooms in their own home (£3,750 if shared); the residence condition must be met
£1,000,000
Annual Investment Allowance for qualifying plant and machinery including kitchen equipment, furniture and fit-out; the main-pool Writing Down Allowance is 14% from April 2026 under FA 2026

What makes hotels and guesthouses accounting different.

TOMS: when packaging bought-in travel triggers margin VAT

The Tour Operators' Margin Scheme applies when any operator bundles bought-in travel elements (accommodation, transport or other travel services purchased from third parties) and sells them as a package. Under TOMS, VAT is due only on the margin between the selling price and the cost of the bought-in elements. Input VAT on those elements cannot be recovered. This applies to hotels and guesthouses that bundle stays with bought-in transfers, excursions or third-party accommodation even if travel is not the main activity. See gov.uk/guidance/tour-operators-margin-scheme-for-vat-notice-7095.

Occupancy and departmental cost control

Revenue per available room (RevPAR), average daily rate and occupancy percentage are the core trading KPIs for accommodation businesses, but they are illustrative management metrics rather than authoritative benchmarks. Departmental accounts separating rooms revenue, food and beverage and events allow the operator to see which areas are profitable and where costs are running ahead of revenue. OTA commission, housekeeping labour and linen are among the costs that must be coded correctly to make departmental reporting meaningful.

B&B and rent-a-room: the residence boundary

A B&B or guesthouse owner letting rooms in their own home may use Rent-a-Room relief of up to £7,500 per year (£3,750 if the property is shared with another person), making that letting income tax-free. The condition is genuine residence: the owner must live in the property. A property used solely as a trading premises does not qualify. Operating a full guest house as a trade (not letting part of a home) is assessed under trading income rules, not the Rent-a-Room Scheme.

Refurbishment, fit-out and capital allowances

Hotels and guesthouses invest repeatedly in rooms, kitchens and common areas. Kitchen equipment, furniture, fixtures and fittings are qualifying plant and machinery for capital allowances purposes. The Annual Investment Allowance covers up to £1,000,000 of qualifying spend per year. From the 2026-27 tax year, the main-pool Writing Down Allowance reduces to 14% (Finance Act 2026 s.28), and a new 40% First Year Allowance is available for qualifying main-pool additions (FA 2026 s.29). Capital allowance sequencing (AIA first, then FYA, then WDA) matters for large refurbishment projects.

How we help hotels and guesthouses.

Annual accounts with departmental revenue analysis

We prepare hotel and guesthouse accounts with rooms, food and beverage and events reported as separate revenue streams, producing management accounts that give you occupancy, ADR and departmental margin visibility each period. Corporation Tax is calculated for the entity structure, whether that is a sole trader, partnership or limited company.

VAT including TOMS and OTA reconciliation

We prepare quarterly VAT returns reconciled to OTA statements, channel manager data and direct bookings, recovering input VAT on commissions. Where TOMS applies because you package bought-in travel elements, we calculate the margin VAT correctly and advise on when TOMS is triggered versus a standard supply of accommodation.

Payroll, tronc and capital allowances

We run departmental payroll for housekeeping, front-of-house and F&B teams, handle tronc for service charges on room and restaurant bills under the Tips Act 2023 rules, and review all capital expenditure on refurbishment for available capital allowances. Employer National Insurance is calculated at 15% above the £5,000 secondary threshold from April 2025, and the £10,500 Employment Allowance is claimed where eligible.

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Common questions

Does TOMS apply to my hotel?
TOMS applies whenever you bundle bought-in travel elements (accommodation, transport or other travel services purchased from third parties) and sell them as a package. It is not limited to dedicated tour operators: a hotel packaging stays with bought-in transfers or excursions is within TOMS for those sales. Under TOMS, VAT is due only on the margin, and input VAT on bought-in elements cannot be recovered. See gov.uk/guidance/tour-operators-margin-scheme-for-vat-notice-7095.
Can a B&B use the Rent-a-Room Scheme?
Yes, but only where the owner genuinely lives in the property. The Rent-a-Room Scheme allows up to £7,500 per year of letting income to be received tax-free (£3,750 if shared with another person), and explicitly covers bed and breakfast and guest houses. The condition is residence: a property used solely as a commercial guest house that is not the owner's home does not qualify. Operating a full guest house as a trade is assessed under trading income rules instead. See gov.uk/rent-room-in-your-home/the-rent-a-room-scheme.
Can I claim capital allowances on a hotel refurbishment?
Yes. Kitchen equipment, furniture, fixtures and fittings are qualifying plant and machinery. The Annual Investment Allowance covers up to £1,000,000 of qualifying spend per year (gov.uk/capital-allowances/annual-investment-allowance). From April 2026, the main-pool Writing Down Allowance reduces from 18% to 14% under Finance Act 2026 s.28, and a 40% First Year Allowance is available for qualifying main-pool additions under FA 2026 s.29. The optimal sequencing is AIA first, then FYA on remaining qualifying spend, then WDA on the pool balance.
What VAT Flat Rate Scheme rate applies to a hotel or B&B?
Hotels and accommodation businesses (including B&Bs, guesthouses, motels, self-catering and youth hostels) use the 10.5% FRS sector rate. The tradescode determines the rate, not the business's own description of itself. A guest house applying the wrong sector rate is accounting incorrectly and may face an assessment for the difference. See gov.uk/hmrc-internal-manuals/vat-flat-rate-scheme/frs7300.

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