Zero VAT rating for residential caravans
Published 9 September 2024
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This publication is available at https://www.gov.uk/government/publications/the-value-added-tax-caravans-order-2024/zero-vat-rating-for-residential-caravans
Who is likely to be affected
Manufacturers, retailers and suppliers of residential caravans and people who buy them for residential use.
General description of the measure
The conditions for the zero rate of VAT to apply to a residential caravan include the requirement for the caravan to be manufactured to standard 3632 issued by the British Standards Institution (BSI). The BSI reviewed and updated this standard in 2023, and it is necessary to amend the Value Added Tax Act 1994 (VATA) to ensure that caravans manufactured to the new standard can qualify for the zero rate.
The instrument removes specific references to the 2005 and 2015 versions of the standard and applies the zero rate of VAT to caravans meeting all versions of the standard taking effect on or after 17 June 2005. The measure also zero rates caravans that meet new versions of the same standard which may be issued in future by the BSI.
Policy objective
Residential caravans are zero-rated, so as to apply a similar VAT treatment to different types of living accommodation. The objective is to ensure that the zero-rating of residential caravans continues, by updating the legislation so that the zero rate applies to:
- those which meet all versions of the relevant British Standard published on or after 17 June 2005
- future versions of the same standard
Background to the measure
Since 6 April 2013 caravans that meet the relevant size criteria and are manufactured to meet with the BSI standard number 3632 are considered to be residential caravans. Residential caravans are the only caravans that qualify for zero rate VAT.
The BSI standard in place on 6 April 2013 was BS3632:2005. In 2015 when the BSI updated the standard, the updated reference to BS3632:2015 was added into the legislation. This standard was updated again in 2023 so the legislation needed to be updated in order to maintain the zero rate for residential caravans. The amended legislation provides for the continuation of the zero rate, which will also apply to caravans meeting any updated version of BS3632 published by the BSI in the future.
This measure does not introduce a change of VAT rate — it serves to ensure continuity of the existing zero rate, and so no consultation was undertaken.
Detailed proposal
Operative date
The measure will come into force on 30 September 2024.
Current law
Current law is contained in Item 1 of Group 9, of Schedule 8 to VATA.
Proposed revisions
The Statutory Instrument amends item 1 of Group 9 of Schedule 8 to VATA, to apply the zero rate to caravans manufactured to any version of BS3632 which came into effect on or after 17 June 2005. The effect of this is to extend the zero rate to caravans manufactured to the 2023 version of BS3632 and also to ensure that if the BSI updates BS3632 in future the zero rate is maintained.
It also makes a consequential amendment to item 1(b) of Group 9, to preserve the zero rate for second-hand caravans occupied before 6 April 2013.
The amendment to VATA will come into force on 30 September 2024.
Summary of impacts
Exchequer impact (£ millions)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is expected to be no impact on individuals as this measure only affects businesses. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure will have negligible impact on a small number of businesses involved in manufacture and supply of residential caravans.
Operational impact (£ millions) (HMRC or other)
HMRC will not incur any extra costs implementing this change.
Other impacts
This measure reflects the improved standards in caravan manufacturing as set out in BS3632:2023, including:
- improved thermal transmittances through external structures
- improved moisture control to reduce condensation
This measure does not fall within the scope of environmental principles duty.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
HMRC will review the impact of this policy through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact Alistair Niven, VAT Reliefs Policy Team by:
- telephone: 03000 510215
- email: alistair.niven@hmrc.gov.uk.
Declaration
James Murray MP, Exchequer Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.