A common query we receive from park owners is how the various charges associated with pitches for caravan holiday homes, park homes and lodges (collectively referred to as “caravans” in this
article) should be treated for VAT purposes. The following article summarises some of these common charges.

How should I treat charges for electricity and gas?

Do you identify actual consumption for electricity and gas?

If yes, the charge made by you as the park owner is considered by HMRC to be subject to VAT at the reduced rate.

If no, the charge to the caravan owner will have the same VAT liability as the pitch fee (standard rated for holiday pitches and VAT exempt for residential pitches).

These rules also apply for first time connection charges to electricity and gas services (provided these exclude general maintenance or provision of the infrastructure that supplies the utilities to the pitch itself).

What about charges for water and sewerage services?

Do you meter actual consumption?

If yes, the charge made by you as the park owner will be a separate supply of water and sewerage that is zero-rated for VAT purposes.

If no, you can’t identify consumption, then any charge for water and sewerage will follow the same VAT liability as the pitch fee.

Again, these rules apply for first-time connection charges to water and sewerage services (provided these exclude general maintenance or provision of the infrastructure that supplies the utilities to the pitch itself).

What is the VAT liability of service charges?

The VAT treatment of service charges to caravan owners will depend on whether:

• your charges are for specific services provided to individual customers; or
• relate to the general upkeep and maintenance of the park.

Where you provide individual customers with specific services (for example window cleaning, repairs etc.), these charges are subject to VAT at the standard rate, irrespective of whether it is
a holiday or residential park.

Where you make charges towards the general upkeep and maintenance of the park (for example grass cutting, repairing roads etc.), the charges are considered further payment for the pitch and will therefore have the same VAT liability as the pitch fee.

Insurance
The premium paid to an insurer is usually exempt from VAT.

However, if you are a park owner and recover the cost of your insurance (e.g. your general liability insurance) by making a separate charge to caravan owners, this charge is treated as further payment for the pitch. The VAT treatment is then standard-rated for holiday parks and exempt for residential parks.

If you arrange insurance on behalf of an individual caravan owner, any charge made, or commission earned, for arranging the insurance may be exempt from VAT (as long as the caravan owner
is the recipient of the supply of insurance made by the insurer).

This is a complex area of VAT law, so we recommend you obtain appropriate advice if this type of income is likely to be received.

Richard Holm
Richard is a Director in KPMG’s Indirect Tax team and leads their work in the travel and tourism sector across the South West.
0117 905 4393
Richard.holm@kpmg.co.uk

Diana Pugh-Hudson
Diana is a Manager in KPMG’s Indirect Tax team and works with a wide variety of organisations across the South West, including a number of businesses in the travel and tourism sector.
0117 905 4067
Diana.pugh@kpmg.co.uk

 

For further information on holiday and park home industry issues, please contact our parks team on 01392 210700 or email parks@stephens-scown.co.uk.

This article first appeared in our holiday and residential park newsletter, read  Explorer