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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: housing and community projects: bed and breakfast accommodation

Local authorities have a statutory obligation under the Housing Act 1985 to provide accommodation to homeless persons. In Northern Ireland this is the responsibility of the Northern Ireland Housing Executive (see VATGPB8305). Where there is a shortage of local authority homes for letting an authority may have to place homeless people in bed and breakfast accommodation.

The supply of accommodation may qualify for VAT on the reduced value for long term residents - please refer to VAT Notice 709/3 Hotels and Holiday Accommodation

In these circumstances the authority is carrying out a non-business activity and so does not have to account for output tax on any contributions it receives towards the cost of providing the accommodation. These contributions may include housing benefit paid directly to the local authority by the Department of Work and Pensions.

Local authorities can recover any VAT they incur in providing the accommodation under section 33 (see VATGPB4000). 

Local authorities also store the possessions of homeless people (see VATGPB8743).