Holiday caravans: new VAT rules

Caravan park owners are being urged to get to grips with new VAT rules for holiday caravans that take effect from 6 April 2013.

HM Revenue & Customs (HMRC) has issued a seven-page information sheet on the arrangements, following changes announced in the March 2012 Budget. At Milsted Langdon, we can provide advice on and assistance with all aspects of the new regime, but some key points are set out below.

Sales of new caravans on or after 6 April 2013…

  • will be VAT standard-rated (20 per cent) if the caravan/residential park home is not longer than 7m (metres) and wider than 2.55m
  • will be VAT reduced-rated (5 per cent) if the unit is longer than 7m or wider than 2.55m and is not manufactured to British Standard 3632:2005, the current standard for residential park homes
  • will be VAT zero-rated if it is longer than 7m or wider than 2.55m and is manufactured to BS 3632:2005
  • Removable contents (i.e. items that are not part of the caravan’s structure, such as white goods, carpets, curtains and furniture) that are sold with a caravan will be standard rated, as at present.

Sales of second hand caravans on or after 6 April 2013…

  • will be as for new units unless the caravan is longer than 7m or wider than 2.55m, meets BS 3632:2005 (or an earlier version of the standard) and was occupied before 6 April 2013.  In these circumstances, it can continue to be VAT zero-rated.

HMRC says that evidence of occupation before 6 April 2013 could include:

  • registration for/payment of council tax
  • a pitch fee agreement/payment of pitch fees
  • rental agreements – e.g. where a caravan has been used as a residential or holiday let
  • payment of utility bills such as gas, electricity and water
  • the date the caravan was sold
  • the date the caravan was manufactured.

The British Holiday & Home Parks Association (BH&HPA) says record keeping will be crucial, as the date of a unit’s first occupation will determine its VAT treatment when sold second hand throughout its life.

It also says that the introduction of the 5 per cent rate in April 2013 could make the VAT second hand margin scheme more attractive to caravan parks, by reducing VAT when a caravan is bought from an individual or business not registered for VAT.

For more information on the new VAT rules, please contact us.

The HMRC guidance is available here.

Posted in Caravans.