Guidance Note for CLA members VAT and caravans/mobile homes Date: 16 May 2014 CLA Guidance Note Reference: GN14-14

Introduction If you are a VAT registered business and run or plan to develop and run a holiday/leisure site, which either has static mobile homes or pitches for touring caravans you should be aware of the VAT issues.

What is a caravan? The term 'caravan' is not defined in the VAT legislation. In practice HMRC base their interpretation on the definitions in the Caravan Sites and Control of Development Act 1960 and the Caravans Sites Act 1968. This provides that a caravan is a structure that: 

is designed or adapted for human habitation;



when assembled, is physically capable of being moved from one place to another (whether by being towed or by being transported on a motor vehicle so designed or adapted); and



is no more than: - 20 metres long (exclusive of any drawbar) - 6.8 metres wide, or - 3.05 metres high (measured internally from the floor at the lowest level to the ceiling at the highest level).

HMRC regard the term ‘caravan’ as including mobile homes (often known as residential park homes), static caravans (often called caravan holiday homes or lodges), but not motor caravans (often called motor homes). Pitch fees or rents received for the granting of the right to caravan owners to keep their caravans on pitches are either exempt or standard-rated. Broadly speaking, the intention of the law is to exempt pitches for caravans used as principal private residences.

Standard rated If you run a ‘holiday/leisure site’, regardless of how the caravans or mobile homes are used, the fees charged will be subject to VAT at the standard rate. This does not include any pitches occupied by your employees as their principal private residences.

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CLA Guidance Note Reference: GN14-14 In determining whether a site is a 'holiday/leisure site', HMRC will have regard to the way that the site is held out/advertised. In most cases, it will be clear from advertising material if a site is operated for holiday/leisure purposes.

Exempt Supplies If you provide pitches for caravans or mobile homes that are: a) on permanent residential sites where caravans can be lived in at all times throughout the year; b) on sites for Travellers where the caravans are used as principal private residences; or c) any type of site (including holiday/leisure sites) if the pitch is occupied by a warden or other employee of the site operator as his or her principal private residence; then these supplies are exempt supplies. No VAT is chargeable by you on the fees you charge for these pitches. Making exempt supplies will have the effect of restricting the amount of input tax you can claim.

Impact of restricted occupancy Where the pitch agreement is for a period of less than a year or subject to an ‘occupancy restriction’ then this is treated as a chargeable supply and you must charge VAT at the standard rate. An 'occupancy restriction' is any covenant (for example, agreement or term in statutory planning consent, site licence or similar permission, the terms of which person to whom the pitch is provided from occupying it by living in a caravan throughout the period for which the pitch is provided (such as a condition that says shall be lived in during February').

a contract), prevent the at all times 'no caravan

However, if there are occupancy restrictions for caravans/mobile homes on your site, but: 

the site is not advertised or held out for holiday/leisure use; and



the pitch is intended to be used as the occupant's principal private residence;

then the fees will not be chargeable to VAT.

Mixed use sites In the case of mixed use sites: 

any references above to 'holiday/leisure sites' include holiday/leisure parts of mixed use sites

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CLA Guidance Note Reference: GN14-14 

any references to 'permanent residential sites' include permanent residential parts of mixed use sites.

Principal private residence HMRC will accept that a caravan is intended for use as a principal private residence if you, the site owner, holds evidence such as: 

proof of listing on the Valuation Office Agency's council tax register (www.voa.gov.uk);



evidence that the occupier has received housing benefit to help with the pitch fee;

or 

agreements or contracts that indicate that the caravan is intended to be used as the occupant's principal home.

The VAT treatment of charges for electricity and gas If you charge users to connect them to a gas or electricity supply, then provided you can identify the actual consumption of users (i.e. through metering at the individual pitch) you may charge VAT at the reduced rate of 5% on both the connection fee and the supply of electricity and gas to caravans. If you do not meter supplies, then the VAT rate charged will follow that of the main supply of the pitch rental. This mean that if the pitch or rental fees are exempt, then the charges for gas and electricity are also exempt from VAT. The position is different for touring caravans or motor homes. Gas and electricity charges are only subject to VAT at the reduced rate of 5% if they can opt whether to connect to the gas or electricity supply. If your agreements make it compulsory for them to connect then the charges will be treated for VAT purposes as part of the overall pitch fee (even if itemised on the bill separately) and will be subject to VAT at the standard rate.

The VAT treatment of charges for water and sewerage Providing you can identify the actual consumption of users (i.e. through metering at the individual pitch), you may account for VAT on water and sewerage at the zero-rate. If this is not possible, the liability must follow that of the main supply of the pitch rental. The position is different for touring caravans or motor homes. As with the supply of electricity and gas above, you can only treat the charges as subject to VAT at the zero rate where there is an option to connect to your water and sewerage services. If a charge is not optional it will be standard rated.

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CLA Guidance Note Reference: GN14-14

The VAT treatment of service charges Where you are making charges to individual caravan owners, the VAT treatment of service charges varies according to whether they apply to: 

the general upkeep and maintenance of the caravan park as a whole (its common areas) in which case they are part of the overall consideration for your supply of the pitch and follow its liability, or



are specific services provided to particular residents in which case they are normally treated as standard-rated.

The liability of local authority charges Where a caravan is used as a person's sole or main residence, it will generally be subject to council tax, for which the resident or owner of the caravan/park home will be liable. Caravans on seasonal or holiday parks will not be subject to council tax (unless used as a person's sole or main residence). Instead, you, as the site owner will be liable to pay nondomestic rates for the whole site. If, as a site owner, you pass on the cost of non-domestic rates to individual caravan owners, the recharge will form part of the pitch fee or rental and will be standard-rated.

Payments for insurance services The premium you pay to an insurer in order to cover your general liability or risks as a park owner is exempt. However, if you recover this cost by making a separate charge to your caravan owners for ‘insurance’, the charge is treated as part of the overall consideration for your supply of the pitch. It follows the liability of the pitch fee or rent.

Practical examples Example 1 You own land on which a number of privately owned caravans/mobile homes are situated. Each pays you an annual rental and you allow them to stay throughout the year with no restrictions. All the caravans are used by their owners as their principal private residence. Each owner is registered to pay council tax in respect of their individual caravan/mobile home. The rental charges will be exempt from VAT, as will any charges you make for gas/electricity, water etc.

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CLA Guidance Note Reference: GN14-14

Example 2 You run a caravan site on your land on which a number of privately owned caravans/mobile homes are situated. The site is not advertised as a holiday or leisure site. The rental agreements provide that the caravans/mobile home cannot be occupied for two weeks at the beginning of January. All are occupied as principal private residences. In these circumstances the rental fees will be exempt from VAT.

Example 3 You run a caravan site on your land on which a number of privately owned mobile homes are situated. Some are occupied as the principal private residence of the owners. Others are used for holidays by their owners even though the site is not advertised as a holiday or leisure site. The pitch fees charged to those occupying the mobile homes as their principal primary residence will not be subject to VAT. However, VAT will be chargeable at the standard rate on the pitch fees to those owners who do not occupy their mobile homes as their principal private residence.

Example 4 You run a holiday site of mobile homes and advertise the site as such. Although most of the caravans are occupied on a short term basis, you have a number of mobile homes let on a long term basis which are occupied by the tenants as their principal private residences, including one to your site manager. The rental fees for all the mobile homes, except that occupied by your site manager, will be subject to VAT at the standard rate as will any electricity charges that are not metered. You should nevertheless be able to recover all the VAT paid tax relating to the manager's accommodation as input tax incurred for the purposes of making taxable supplies (see paragraph 12.2.1 VAT Notice 700 VAT General Guide)

For further information please contact: Louise Speke Chief Tax Adviser CLA, 16 Belgrave Square London SW1X 8PQ Tel: 020 7235 0511 Fax: 020 7235 4696 Email: [email protected] www.cla.org.uk Important Information. No responsibility for loss occasioned to any person acting or refraining from action in reliance on or as a result of the material included in or omitted from this publication can be or is accepted by the author(s), the CLA or its officers or trustees or employees or any other persons. © Country Land & Business Association 2014. All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in any retrieval system of any nature without prior written permission of the copyright holder except as expressly permitted by law.

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