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AW Accountants

Unpacking the VAT Puzzle: Demystifying VAT on charges made by residential and caravan parks

As a park owner, you may find yourself asking which rate of VAT applies to services and provided by caravan and residential parks? Various services offered and charges made by holiday and residential parks attract different rates of VAT, according to their particular circumstances.


Different rates of VAT apply to services and charges provided and made by caravan and lodge  parks


Here, we break down the main charges for services provided by caravan and residential parks and outline the rates of VAT that apply.



Which VAT rate applies to the supply of electricity and gas by the park owner?


Where the pitches are metered and the park owner can identify actual consumption of the electricity and gas per pitch and charge on the basis of consumption, the charge by the park owner is considered to be a separate supply of electricity and gas subject to VAT at the reduced rate of VAT.


If the actual consumption can't be identified, the charge made to the caravan owner follows the same VAT liability as the pitch fee (standard-rated for holiday parks, and exempt for residential parks).



How much VAT is due on charges made by the park owner for water and sewage?


Where the park owner has meters for water and sewerage per pitch and charges based on the actual consumption, HMRC considers this to relate to a sperate supply of water and sewerage that is zero rated for VAT. If the actual consumption can't be identified, then any charge for water and sewerage follows the same VAT liability as the pitch fee (standard rated for holiday parks and exempt for residential parks).



Which VAT rate applies to the connection of the caravan to mains services?


The VAT treatment of the charge made by parks to connect the caravan or lodge to mains services for the first time depends on whether the actual consumption of the utility is metered. If the actual consumption is identified using a meter for each pitch, then the connection charges follow the same VAT liability as supply of the utility (reduced rate for electricity and gas and zero rated for water and sewerage). Where consumption can't be identified, charges made for first time connection to mains services follows the same VAT liability as the pitch fee(standard rated for holiday parks and exempt for residential parks.)



How much VAT is due on the delivery and siting?


The charge made by parks for delivering, unloading and siting caravans will generally will form part of the 'consideration', meaning it will follow the VAT liability of the caravan (usually reduced or zero rated) as this is the single supply for VAT purposes.



Local authority charges


Holiday caravan park owners are liable to pay non-domestic business rates to the local authority. Where the costs are passed to caravan owners, the charge will be standard-rated. Owners or residents of caravans used as a sole or main residence will be liable to council tax and not business rates.



Insurance


The insurance premium paid to an insurer is usually VAT exempt. If a park owner recovers the insurance cost by making a separate charge to caravan owners, this is tends to be treated as further payment for the pitch and the VAT treatment follows the same liability as the pitch fee (standard-rated for holiday parks, and exempt for residential parks).


If the park owners arranges insurance on behalf of an individual caravan owner, any charge made or commission earned for arranging the insurance is likely to be VAT exempt, provided the caravan owner is the recipient of the supply of the insurance made by the insurer. Be sure to discuss this with your trusted advisors as this can be a complex area.



Service charges


Where park owners make charges towards the general upkeep and maintenance of the park e.g, grass cutting, repairing roads etc, HMRC considers the charges to be further pitch payment so the charges follow the same VAT liability as the pitch fee (standard-rated for holiday parks and exempt for residential parks).



Repairs and maintenance


Where park owners provide individual caravan owners with specific repair and maintenance services e.g. caravan repairs, window cleaning, draining down services etc.), these charges are subject to VAT at the standard rate for both holiday and residential parks.



Replacement items


Removable contents supplied with a zero-rated or reduced-rated caravan are subject to VAT at the standard rate, unless those contents are a type that would usually be incorporated by builders as fixtures in new dwellings e.g. heating systems, kitchen sinks, toilets, washing facilities. If removeable contents need replacing e.g. a fridge, any charges made by the park owner for the sale of those items are subject to VAT at the standard rate.



Decking


A decking sold with a caravan follows the VAT liability of the caravan (usually reduced-rated or zero-rated) as this is the single supply for VAT purposes. Where a decking is sold separately from a caravan e.g. the caravan purchases buys it at a later date then the sale would be subject to VAT at the standard rate.



Car parking and garages


Generally the supply garages and parking are standard-rated VAT, with an exception. The VAT on the parking charges for a permanent residential caravan pitch will be VAT exempt if the ownership on the land on which the parking space or garage is sited is retained and is reasonably close to the caravan pitch.


















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