VAT: Addressing borderline anomalies For Holiday Caravans
6. Holiday Caravans
What does this measure do?
36. This measure taxes the sale of holiday caravans (mainly static holiday
caravans), ensuring that the sale of all holiday caravans is standard-rated,
while preserving the zero rate for residential caravans.
What are the current rules?
37. Currently, the sale of a caravan that can legally be towed on UK roads by
a typical family car is standard-rated (caravans 7m or less in length and
less than 2.55m wide). The sale of larger caravans is zero-rated, even
though many are used for holiday purposes.
Why do the current rules need changing?
38. The VAT zero rate was only intended to apply to the sale of residential
caravans and not to holiday caravans. The legislation only taxes as
holiday caravans the sale of caravans that can legally be towed by a family
car (commonly known as “tourer” caravans). However, over the years an
increasing number of other caravans that are used for holiday purposes
are benefitting from the zero rate but the sale of other types of holiday
accommodation (in smaller caravans or in new holiday homes that cannot
be occupied all year round ) is taxable.
What is the scope of the change?
39. The size test will be replaced by a new test that restricts the zero-rate to
the sale of caravans that conform to British Standard BS 3632 (or
equivalent) which indicates that the caravan is designed and manufactured
for continuous all year round occupation, and is therefore suitable for
residential accommodation. This change will help to ensure that all
holiday caravans are taxed consistently at the standard rate.
Examples of products affected by the change include: caravans and
that do not meet the required British Standard.
Examples of products not affected by the change include: residential
park homes which do meet the required British Standard
40. The change will also include a minor update to confirm that the reference
to “paragraph 5(3)” in item 3 should be replaced with “paragraph 5(4)”, and
the reference to “item 3 of group 5” should be “item 4 of group 5”.
Questions on proposed new legislation
Q12 – Does the proposed new test adequately ensure that all caravans used
for holiday purposes are standard-rated as intended? If not, how might the
test be adapted? For example, do you think that it is necessary to introduce a
second limb to the test to ensure that zero-rating only applies to caravans that
meet the British Standard 3632 and which are also sited or to be sited on land
which is not subject to an occupancy restriction (e.g. where use of the
caravan as a principal place of residence is prevented by the terms of a
covenant, statutory planning consent or similar permission)?
Q13 – If the test is adapted along the lines of question 12, what kind of
evidence would a supplier of a caravan need to obtain in order to be satisfied
that the caravan they are about to sell will not be sited on land on which there
is an occupancy restriction? How easy will it be for them to obtain this
Q14 – In VAT law it is not permissible to extend the zero rate to goods or
services that are standard-rated. If the current test in group 9 is replaced with
a single test based on British Standard 3632, would the sale of any caravans
that are currently standard-rated inadvertently be reclassified as zero-rated?
Q15 – What would manufacturers of holiday static caravans have to do to
make existing designs comply with BS 3632 or equivalent. How much would
this cost and what would be the impact on the impact of static holiday
Questions on Impacts on businesses and consumers
Q16 – We have considered impacts on businesses and consumers of the
changes on static caravans and these are set out in the Table of Impacts in
Annex B. We would welcome comment on these impacts (including any
specific impacts on small businesses) and would particularly welcome details
of any impacts we have not identified.