As grateful holiday park owners and caravan manufacturers and distributors know, as a result of concerted efforts by certain MPs and trade bodies such as the BH&HPA, the government was persuaded to change their mind on the VAT treatment of holiday caravans.
Currently holiday caravans are standard rated if they don’t exceed 7 metres in length and 2.55m in width and are zero rated if they exceed either of those measurements. Removable contents such as white goods, carpets, furniture etc are standard rated.
What will the new VAT rules be for holiday caravans?
The decision to apply the 20% standard rate to the sale of all holiday caravans was withdrawn after evidence of the likely impact on the industry was given.
The new rules now come into force on 6th April 2013, where a holiday caravan less than 7m in length or 2.55m in width will continue to be standard rated as will the removable contents of all holiday caravans.
However, a caravan that is longer than 7m or wider than 2.55m and which is not manufactured to the 2005 British Standard 3632 will attract vat at a reduced rate of 5%. A caravan longer than 7m or wider than 2.55m and manufactured to BS 3632: 2005 will be zero rated.
What's the difference between residential mobile homes and holiday caravans?
Residential mobile homes or caravans have always been zero rated and the use of BS 3632:2005 alone to distinguish between residential and non residential caravans, and therefore to determine zero rating, was questioned as many holiday caravans have been built to the residential specification.
HMRC took the view that a requirement for proof of residential planning or a residential agreement would discriminate against all those in the chain bar the final supplier of the residential caravan and that the reduced vat rate of 5% would not make it economically viable to upgrade holiday caravans to BS 3632 to benefit from zero rating.
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For further help or support, please contact our specialist Parks team who will be happy to provide bespoke advice and guidance.