The Caravan Industry expresses profound relief as Treasury move preserves jobs
Instead of a tax hike to 20%, which would have added nearly £6K to the sale of an average caravan holiday home, Treasury today confirmed that from 1st March 2013 ‘static’ caravans will be VAT-rated at 5%.
The NCC’s Director General, John Lally, speaking shortly after the announcement, said: “Treasury and Ministers listened to our arguments. From the beginning, we upheld Government had underestimated the impact and overestimated the net revenue of imposing this tax. The NCC and BH&HPA working together put forward compelling evidence which clearly showed the potentially devastating effect this tax would have had on an industry that is crucial to the well-being of both domestic tourism and of British manufacturing.
“Without doubt, this move has saved thousands of jobs – and probably averted many business failures. With a united voice, industry worked to prove to Government that if people don’t buy caravans, a whole chain reaction is put in place, affecting a range of businesses, employment prospects in many deprived areas and last, but not least, British tourism receipts.
“We were very fortunate that Graham Stuart MP immediately saw the dangers and recruited MPs from across the House – and indeed across the UK - to support his efforts to avert this tax. This culminated in 77 MPs supporting his Early Day Motion in opposition of VAT at standard rate on caravans.
“What we have is a manageable increase for an industry that is in gradual recovery after the credit crisis. This move allows our industry to continue to provide a vital component to British tourism, to be competitive, to succeed.”
The NCC (National Caravan Council) is the UK trade body for the tourer, motorhome, holiday caravan and park home industries. It represents the entire industry supply chain, including amongst its members all major manufacturers, distributors, parks operators and a range of businesses that supply the industry.
It was announced in the 2012 Budget that, from 1 October 2012, VAT at 20 per cent would be imposed on caravan holiday homes. Caravan holiday homes have been zero rated for VAT since its introduction in 1973 (although VAT has always been applied on the 'removable items' within them, where applicable). The Government consultation was extended but closed on 18 May 2012.
KPMG, in association with CIL and Oxford Economics, were commissioned by the NCC and the BH&HPA to assess the economic impact of Government’s proposal to impose the VAT on the sale of new holiday caravans. More details on the findings of the Economic Impact study are contained in the joint NCC and BH&HPA press release of 21 May 2012.
The NCC and BH&HPA, in its consultation response put forward a number of robust economic and legal arguments against the proposal. Legal advice suggested that the new definition would give rise to new anomalies and litigation in the already complex area of VAT. Using Government’s suggested definition of British Standard BS3632 to define residential caravans (which are to remain nil-rated) is also fraught with difficulties.