VAT Concessions to end for caravan owners
Three VAT concessions for caravan owners will cease to apply from 2012 because they conflict with EU law, HM Revenue & Customs (HMRC) announced today.
Following a recent legal decision HMRC is reviewing its concessions. The majority are being retained but a minority, after a period of notice, will end. This is because they are outside the scope of HMRC’s administrative discretion and it has not been possible or appropriate for HMRC to legislate these extra statutory concessions (ESCs) as they are contrary to EU law.
From 1 January 2012 caravan owners will no longer receive:
- the recharge of business rates as outside the scope of VAT
- zero rate water and sewerage charges where actual consumption cannot be identified; and
- first time connection to utilities as zero rated for VAT.
Mike McLachlan, Senior VAT Adviser, said:
“We recognise that caravan site owners may have to make adjustments and that caravan owners will now incur VAT on supplies that were previously zero rated or outside the scope of VAT. We will offer a 12 month period of notice before the concessionary treatment formally comes to an end.”
HMRC has discussed the impact of these changes with caravan representative bodies.
1. Extra statutory concessions (ESCs) have been a feature of the UK tax system for decades. The House of Lords decision in the Wilkinson case (http://www.bailii.org/uk/cases/UKHL/2005/30.html ) clarified the scope of HMRCs administrative discretion to make concessions that depart from the statutory position.
2. In the light of that decision HMRC is reviewing its concessions. Most ESCs will continue in their current form as they are within the scope of HMRCs administrative discretion.
3. Where an existing concession exceeds the scope of HMRCs administrative discretion the effect of the concession will be maintained by putting it on a legislative basis where it is possible and appropriate to do so.
4. Where it is not possible or appropriate to legislate a concession which exceeds the scope of HMRCs discretion it will need to be withdrawn.
5. The technical note withdrawal of extra statutory concessions can be found at http://www.hmrc.gov.uk/menus/extra-stat-con-tn.pdf