I have written about this previously, but I think now is the time to go into further detail about the 5% VAT introduction on new static caravans which comes into force in April 2013.
VAT has always been applied to “removable” items in your new static caravan. This included TV’s, fridges and dishwashers etc. VAT was applied to those items at the prevailing rate at the time of purchase.
What is VAT?
VAT or Value Added Tax was designed to be charged on items which were deemed as a “luxury” rather than a necessity. That is why the VAT rate for unprocessed food is Zero Rated. However over the years successive governments have started to apply VAT to services and products to try and scrape as much tax into the coffers as they can get away with. This is why we now have 5% VAT on household fuel which isn’t really a luxury as we all need it to keep warm, but the government sees it as a luxury so there you go, more tax!
It could be argued that female sanitary products are also a necessity, but the government too believes these to be a luxury! You could say that the initial reason for VAT has slipped away and the essence of it now is to tax us as much as possible, or get away with taxing us on non-luxury items if they think we don’t understand the reason behind it!
Why have they changed the VAT rules on new static caravans?
The answer is actually quite obvious – the government needs the money!
The recession has hit government services hard in recent years. Large cutbacks are continuing as many departments are faced with economic issues that their annual budgets can’t meet. Therefore HMRC now needs to get as much money back in as possible to try and support the public sector whilst the private sector carries on struggling to keep their heads above the water.
Governments are great at targeting minority sectors where they think it will not hit the radar of the great British press. The static caravan industry was one sector they thought they could tax and get away with, however as an industry we hit back!
How the Static Caravan industry hit back
The initial VAT rate was proposed at 20% and this was then passed by the government and subsequently scheduled for introduction in October 2012. This would have placed an extra cost to holiday home owners of £6000 on top of the price of an average new static caravan. Manufacturers, holiday parks and businesses that rely heavily on tourist trade would have been hit so hard that many would have gone out of business which would have resulted in 1000’s of job losses.
The main problem is that UK holiday destinations suffer from lack of investment and unemployment levels are already extremely high when compared to other areas of the UK. One example is Rhyl in North Wales where there unemployment rate is at 36.5%* and this would have extended further should holiday home ownership drop due to the VAT introduction.
As an industry, we took this extremely seriously and gave the government such strong views that the national press took up the story. We argued that if static caravans should be charged VAT at 20% then surely the building of second homes made from bricks and mortar should also be charged VAT at the same rate.
This seemed to hit home and got the government talking to us and many local council officials backed our cause. One policy for the government is to help the struggling building sector. Therefore charging VAT on new build properties was a hornets nest that they didn’t want to mess with. Our argument was also followed up with job losses, which again the government are trying avoid so all in all, we got a result – not the perfect one, but at least something in the industry’s favour.
VAT was subsequently reduced to 5% and then pushed to become enforced in April 2013. This gives us the rest of this year to sell as many new static caravans as possible before the 5% introduction. It is not a perfect solution to the problem, and there will be issues for manufacturers and holiday parks in trying to sell new static caravans, but at least the levels of concerns have been mitigated for now.
Post April 2013 we will be looking carefully at the impact this has made on those that will be effected by the VAT introduction. I personally hope that manufacturers and holiday parks will work together to help promote the virtues of buying a new static caravan to prospective owners and also keep their prices competitive to keep the industry going whilst inflation is where it is and salaries are rising to meet higher costs. If this happens, we can keep the industry going and hopefully booming in the coming years.
* Source: Denbighshire Council Website