Policy paper

Revenue and Customs Brief 12 (2015): VAT liability of verandahs sold with caravans

Published 30 July 2015

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This publication is available at https://www.gov.uk/government/publications/revenue-and-customs-brief-12-2015-vat-liability-of-verandahs-sold-with-caravans/revenue-and-customs-brief-12-2015-vat-liability-of-verandahs-sold-with-caravans

Purpose of this Brief

This brief sets out the HM Revenue and Customs (HMRC) position following a decision of the Upper Tribunal. The case concerned the VAT liability of verandahs sold with caravans.

Readership

Anyone who sells new or used caravans with verandahs - and their advisers.

Background

The supply of a static caravan, excluding removable contents, can be reduced rated or zero-rated for VAT purposes, depending on its size and specification. HMRC considered that where the reduced or zero rate applied, it did not extend to a verandah or decking structure supplied at the same time. An optional verandah was considered by HMRC to be a separate standard-rated supply.

An appeal was made by Colaingrove Ltd on the grounds that they were making a single supply of a caravan with a verandah, and that as the verandah was ancillary to the caravan it should receive the same VAT treatment.

The First Tier Tribunal accepted that the verandah ‘served’ the static caravan. However it held that this type of verandah was:

  • a structure in its own right, payment for which formed a substantial part of the total amount paid for the verandah and caravan taken together
  • not integral or incidental to the static caravan
  • an optional extra

Therefore the Tribunal decided that there was a separate supply of the verandah which was subject to VAT at the standard rate.

Colaingrove Ltd appealed and the Upper Tribunal reversed the decision ruling that the sale of a static caravan with a verandah is a single supply for VAT purposes.

Implications of the Upper Tribunal decision

As a result of the Upper Tribunal decision, HMRC accepts that verandahs and decking structures sold with static caravans are to be treated as a single supply. Therefore the VAT liability of the verandah is the same as that of the caravan. Notice 701/20: caravans and houseboats will be updated to reflect this change.

Claims and retrospective action

Notice 700/45: how to correct VAT errors and make adjustments or claims explains how to claim a refund.

Please note:

  • claims are subject to the 4 year CAP in line with normal HMRC procedures
  • the Business Income Manual provides further guidance for direct tax implications where amounts claimed are not fully reimbursed to affected customers
  • claims made should be adjusted for any amounts due to set-off under Section 81(3) of the VAT Act 1994 (outstanding debts, assessments and so on) and Section 130 of the Finance Act 2008 (outstanding debts under any other head of taxation)
  • further information can be obtained from the Contact HMRC pages
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