17 October 2023

Consider the following options… - Elizabeth Small writes for Taxation

Tax Partner, Elizabeth Small, has written for Taxation on the tax consequences of the different ways of owning and operating a hotel.

When recently sipping a coffee in a hotel lobby, I was pondering (being between books) that there are a number of ways in which a hotel might be owned and operated and that each of these will have a raft of different tax consequences. In the following scenarios I am going to assume that the freehold to a Brighton hotel is owned by ‘HotelCo’, a single purpose entity which is ‘property rich’. The scenarios to be explored are:

  1. UK tax resident friends and family own the shares in HotelCo (in this scenario, a UK tax resident company) which owns the freehold interest and operates the hotel;
  2. HotelCo is a non-resident company, owned by non-resident persons, and has leased the hotel to ‘Opco’, a wholly-owned subsidiary which operates the hotel (as explained further below, little turns on where the central management and control (CMC) of OpCo is or indeed where OpCo was originally incorporated);
  3. HotelCo is rebranded as LandlordCo (again it is nonresident both in terms of CMC and incorporation) and lets the property to a third party branded hotel tenant, ‘LeaseCo’;
  4. HotelCo is rebranded as ‘NRHotelCo’ (obviously non-UK tax resident) and enters into a hotel management agreement (HMA) with a third party branded company, ‘HMACo’.

The full article can be read here.

Our Insights

"They are also excellent at clear communication and I could not recommend any improvements."
Chambers UK, 2021