Motorhomes versus caravans…
In the Upper Tribunal (UT) case of Oak Tree Motorhomes Limited the simple issue was whether motorhomes may be considered to fall within the definition of a “caravan” and thus benefit from certain zero rating provisions. Oak Tree sold certain vehicles commonly called ‘motor homes’, ‘motor caravans’ and ‘campervans’
The VAT Act 1994, Section 30(2) provides that supplies of goods of a description specified in Schedule 8 are zero-rated. At the relevant time this was VAT Act 1994, Schedule 8, Group 9, item 1 which described the following goods: “Caravans exceeding the limits of size for the time being permitted for the use on roads of a trailer drawn by a motor vehicle having an unladen weight of less than 2,030 kilogrammes.” Oak Tree contended that the sales of their vehicles were covered by this item and thus should have been zero rated rather than standard rated.
So what is a caravan?
The term is not defined in the VAT legislation, but HMRC base its interpretation on the definitions in the Caravan Sites and Control of Development Act 1960 and the Caravans Sites Act 1968 as set out in Public Notice 701/20 para 2.1. In that Notice HMRC state 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)
- 8 metres wide, or
- 05 metres high (measured internally from the floor at the lowest level to the ceiling at the highest level)”
(Note: No reference is made to engine here).
The Decision
It was accepted by HMRC that the vehicles were large enough to qualify as caravans, so the matter turned on the interpretation of a “caravan” and whether the fact that the relevant vehicles incorporated an engine disbarred them. The UT did not appear to waste much time in agreeing with the First Tier Tribunal that a motorhome was not a caravan. This was so even though accommodation in a motorhome and a qualifying caravan might be almost identical. The UT considered that the First Tier Tribunal’s interpretation of “caravan” by reference to the Oxford English Dictionary was appropriate. An important definition being one which refers to a caravan as generally “…able to be towed”. It was also decided that an engine represented “…an obvious and significant distinction” between a caravan and a motorhome. It is also interesting that despite HMRC’s Notice referring to the Caravan Act 1960, the UT considered that this should not be used in determining whether a vehicle should be regarded as a caravan
Commentary
This was almost a foregone conclusion, but the appellant obviously thought it was worth another bite at the cherry as the claim was worth over £1.1 million (and an ongoing saving). There are lots of areas involving caravans that throw up VAT oddities, including, but not limited to; pitches, skirts, contents, holiday homes and compound/multiple supplies here
It may also mean that HMRC will have to consider redrafting Notice 701/20
If a business is involved in any transactions involving caravans it would be prudent to consider whether all of the available reliefs are being taken advantage of, and whether VATable supplies have been correctly identified.