I may well be setting a new world record for the time between registering and making my first post!

The VAT situation can be affected by whether a payment made in advance is a genuine pre-payment (which crystallises the tax point and the rate of VAT applying) and a security deposit (e.g. something that is forfeited in the case of a no-show) which doesn't.

However, even in the former case, the main rule is overridden by specific provisions in section 88 Value Added Tax Act 1994.

This permits - but does not require - the supplier (i.e. Hilton) to apply the new rate of VAT to the part of the accommodation actually used after the date of the change.

I would like to think that when the rate falls (as it did on 1 December), Hilton will use this provision, but not when the rate rises again as is is scheduled to do on 1 January 2010.