VAT and Holiday Caravans
New legislation came into force on 6 April relating to the VAT treatment for the sale of new and used static caravans. HMRC has published a VAT information sheet. The new rules will apply to the caravans themselves, as opposed to the nature of the pitch and park on which they are situated.
There will be three possible rates of VAT that can be applied. The criteria for determining whether a caravan will either be standard-rated (currently 20%), reduced-rated (currently 5%) or zero-rated on a sale will depend on the following:
- The size of the caravan;
- The standard to which the caravan is manufactured; and
- The date of its first occupation
In all cases, the sale of removable contents remains standard rated for the purposes of VAT.
Sales of new caravans
The impact of the changes will be most relevant to businesses that make or sell caravans which are longer than 7 metres; or wider than 2.55m (the "Size Criteria"), and which do not meet the British Standard 3632:2005 (the "British Standard"). There will be no changes to the VAT on those caravans which do not exceed the Size Criteria. Those caravans will remain standard rated for VAT purposes. Therefore:
Sales of new caravans which do not meet the British Standard, and exceed the Size Criteria, will attract a reduced-rate of VAT if they are sold after 6 April 2013.
Sales of new caravans which are manufactured to the British Standard, and exceed the Size Criteria, will be zero-rated.
For the above two situations an apportionment will need to be made between the caravan and its removable contents as the removable contents will attract VAT at the standard rate whilst the caravan will either be zero rated or attract reduced rate VAT.
The crucial 'tax point' for the attraction of VAT will be either the raising of a VAT invoice, or the collection of payment. In any event, the reduced-rate for VAT on sales of new caravans will only apply if the tax point occurs after 6 April 2013.
SALES OF SECOND HAND CARAVANS
After 6 April 2013 record keeping in the industry will become even more important for the sale of second hand caravans. A second hand caravan's VAT liability will be determined by the date the caravan was first occupied. Therefore:
- If the caravan does not exceed the Size Criteria, and was occupied before 6 April 2013, then it will be standard rated for the purposes of VAT; but
- If it exceeds the Size Criteria, was occupied before 6 April 2013, and was manufactured in accordance with the British Standard or one of the five previous earlier versions of that standard then it will be zero-rated.
If the caravan was first occupied after 6 April 2013 then the new rules will apply, and as with the first sale of the caravan the zero-rate will only apply if it was manufactured in accordance with the British Standard. If the caravan was not manufactured in accordance with the British Standard it will be standard rated, just as it would have been on its first occupation.
In order to qualify for the zero-rating, evidence of occupation may need to be provided. The Guidance from HMRC suggests that such evidence could include, but may not be limited to:
- Registration for/payment of council tax
- A pitch fee agreement/payment of pitch fees
- Rental agreements-for example where a caravan has been used as a holiday let
- Payment of utility bills such as gas, electricity and water
- The date the caravan was sold
- The date the caravan was manufactured
If you would like to discuss the legislative changes further, please contact: Brian Garner on 01392 687662, firstname.lastname@example.org
Michelle Perring on 01392 687599, email@example.com