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Monday, 30 November 2009

The biggest story to hit the newspapers this year...

The biggest story to hit the newspapers this year has been, without a doubt, the revelations about MPs’ expenses.

In an effort to draw a line under the scandal, Sir Christopher Kelly and the Committee for Standards in Public Life published a report in early November that makes recommendations on what MPs should and should not be allowed to claim.

MPs' Expenses and Allowances: Supporting Parliament, safeguarding the taxpayer is a substantial document – 144 pages – so few people, other than journalists, will wade through it in its entirety.

It is interesting to see what the Kelly report has to say about hotel expenses.
Under the old system, MPs were allowed to claim up to £24,222 every year to cover their hotel bills when they were away from their principal residence. In 2007-08, Parliament sat for 165 days. That means MPs could spend £146.80 a night on a hotel. At rack rate, that would get you a night at the Ramada Ealing.

Interim measures introduced when the scandal broke imposed a cap on hotel bills of £1,250 per month, reducing the average per day to a shade over £90. If MPs were paying rack, this would probably stretch to a Travelodge in London.

So what will the Kelly report mean for MPs who stay in hotels?
The Kelly Report suggests that an independent regulator set an upper limit for overnight hotel costs, with a hint that £120 per night (plus VAT) might be a suitable upper threshold. That budget might just stretch to a Novotel.

But of course, MPs do not need to stay in a hotel every night of the parliamentary year and they will pay nowhere near rack rate. Taking both into consideration, MPs could probably stay in any hotel they choose in London. And with five-star hotels looking a little empty these days, MPs might be staying in some very nice places indeed.

Tuesday, 24 November 2009

The last thing you will probably be worrying about this New Year’s Eve...

The last thing you will probably be worrying about this New Year’s Eve is VAT. You are more likely to be thinking about where to grab your first kiss of 2010 or quickly thinking up a few resolutions that will inevitably be broken a few days later.

But if you are staying in a hotel that evening, your host may be worrying about just that. The temporary 2.5% reduction in VAT to 15% that was introduced in response to the wobbling economy will be reversed at midnight on 31 December 2009.

So what happens in the hotel bar around midnight? Do hotels have to reprogram your tills just as Big Ben’s bongs sound out to add 2.5% to the cost of a bottle of bubbles.

Luckily, the HM Revenue and Customs has said it will be flexible and let hotels (and other businesses such as bars) charge 15% until 6am. It will also turn a blind eye to any minor mistakes made in accounting for VAT over the New Year.

Whether HMRC will be as lenient with businesses who make mistakes as a result of the entry into force of new European VAT rules on the same date – when B2B supplies of services will begin to be taxed at the place where the customer is established and no longer at the place where the supplier is established – remains to be seen.