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bigduckontax, Accountant
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Is VAT applicable at 20% on Council Tax charged to a caravan

Customer Question

Is VAT applicable at 20% on Council Tax charged to a caravan holiday park?
Is VAT applicable at 20% on Gas and Electricity supplied by the caravan holiday park to individual domestic users of same in their holiday homes? Should the VAT rate be at 5% which rate is normally applied to domestic users of gas and electricity?
Your answers please to***@******.***.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

There are two answers to your question as the VAT position differs depending upon the type of rental. VAT Notice 701/20 states that:

'If you provide accommodation in a caravan that is:

  • sited on a park advertised or held out for holiday use, and
  • let to a person as holiday accommodation

your supply will be standard-rated.' You therefore charge 20% to occupiers for these items.

The Notice [edited] further provides:

'If you provide accommodation in a caravan during the off-season [September to Easter}, you may treat your supply as exempt from VAT provided:

  • it is let to a person as residential accommodation
  • it is let for more than 28 days, and
  • holiday trade in the area is clearly seasonal

You should keep a copy of the tenancy agreement or similar evidence to show that the accommodation was occupied for residential purposes only. In such cases the whole of the let, including the first 28 days should be treated as an exempt supply.'

In the latter case you have a problem. Where exempt supplies are provided input tax can only be reclaimed in proportion to the amount of supplies at the standard, reduced or zero rated supply. Thus, if say one third of your supplies were exempt, then only two thirds of the input tax could be reclaimed. In such an instance you should be careful in setting your rates of rental to ensure that you are not out of pocket. There is a de minimis calculation which is applied in such circumstances and this can result in you being able to reclaim all input tax, but this calculation is largely dependent on the proportion of exempt supplies and, depending on the level of off season supplies will probably not benefit you.

All these charges, Council Tax and electricity etc would be calculated and used to determine an appropriate rental. For seasonal rents VAT would be omitted from the computation as it would be reclaimed as input tax, but for out of season rentals it would have to be included as the supply is generally exempt and thus the input tax not recovered.

I do hope that I have been able to resolve your VAT conundrum for you.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3375
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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