Caravans and houseboats (VAT Notice 701/20)
How to account for VAT if you supply caravans and houseboats, or you're a caravan site operator, or you provide mooring facilities for houseboats.
1. Overview
1.1 This notice
This notice gives information on:
- how supplies of caravans should be treated for VAT purposes (read sections 2 and 3 of this guidance)
- the treatment of various services of a type normally supplied by owners of caravan sites, or other people making related supplies to the owners of caravans or caravan sites (read sections 4 to 6 of this guidance)
- how you should treat supplies of houseboats including accommodation and the provision of other services connected to the supplies (read section 7 of this guidance)
- how to treat removable contents in new or second-hand zero-rated caravans and houseboats (read section 8 of this guidance)
1.2 Who should read this notice
This notice is for anyone who:
- is involved in the manufacture or sale of caravans and houseboats
- is a caravan site owner
- provides accommodation in caravans and houseboats, or mooring facilities for houseboats
1.3 The law
This notice covers the following areas of the VAT Act 1994:
- the conditions under which the supply of caravans and houseboats are zero rated are set out in Schedule 8, Group 9
- the conditions under which the supply of caravans are reduced rated are set out in Schedule 7A, Group 12
- removable contents of caravans and houseboats are precluded from zero rating unless they’re of a type mentioned in Schedule 8, Group 5, Item 4
- the treatment of pitches for caravans and moorings for houseboats is covered by Schedule 9, Group 1 — depending upon the circumstances these can either be exempt or taxable at the standard rate
2. The VAT treatment of caravans
2.1 Definition of a caravan
The term ‘caravan’ is not defined in the VAT legislation. In practice we base our interpretation on the definitions in the Caravan Sites and Control of Development Act 1960 and the Caravans Sites Act 1968.
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)
- is no more than:
- 20 metres long (exclusive of any drawbar)
- 6.8 metres wide
- 3.05 metres high (measured internally from the floor at the lowest level to the ceiling at the highest level)
A ‘twin unit’ caravan can fall within this definition if composed of no more than 2 sections designed to be assembled on site by means of bolts, clamps and other devices, as long as, once assembled, it’s physically capable of being moved from one place to another.
For a caravan to be regarded as designed for human habitation it must have the attributes of a dwelling, that is, it must consist of self-contained living accommodation. It would need to have washing facilities and the means to prepare food (such as kitchens and bathrooms).
We see the term caravan as including mobile homes (often known as residential park homes), static caravans (often called caravan holiday homes or lodges), but not motor caravans (often called motor homes).
A structure that fails to meet the conditions may constitute a building for planning purposes, in which case, the first sale or long lease of it may qualify for the zero rate of VAT under the conditions described in Notice 708: buildings and construction.
The VAT liability of a caravan depends on its size.
2.2 Liability of the supply of a caravan
If you’re supplying a new caravan, you’ll need to establish whether or not VAT is chargeable.
The supply of the caravan will be:
- standard rated if it does not exceed either 7 metres in length or 2.55 metres in width
- reduced rated if it exceeds either 7 metres in length or 2.55 metres in width and it’s not manufactured to a version of BS3632 issued by the British Standards Institution which came into effect on or after 17 June 2005
- zero rated if it exceeds either 7 metres in length or 2.55 metres in width and it is manufactured to a version of BS3632 issued by the British Standards Institution which came into effect on or after 17 June 2005
If you’re supplying a second-hand caravan the VAT liability follows the previous bullet points unless the caravan was occupied before 6 April 2013 in which case the supply will be zero rated.
These measurements exclude towing bars and any similar apparatus used solely for the purpose of attaching the caravan to a vehicle.
2.3 Supply of a caravan
You’re supplying a caravan if you do any of the following:
- sell it
- lease it under a long term leasing agreement under which the lessee is free to transport it to a park or other place of their own choosing
- loan it without making a charge
- divert it to your own personal use
3. Other supplies associated with caravans
3.1 How to treat fixtures, fittings and removable contents
Where zero rating applies to a caravan, it also includes those goods which a builder would ordinarily incorporate into a new house or flat. Other fixtures and removable contents supplied with the caravan are standard rated. Examples of goods falling into these 2 different liabilities are as follows:
- zero-rated goods:
- sinks
- baths
- WCs
- fixed partitions
- water heaters
- standard-rated goods:
- tables
- chairs
- mattresses
- seat cushions
- fridges
- carpets
- washing machines
The examples listed are not exhaustive.
You will find more about this distinction in Notice 708: buildings and construction, it explains how to calculate the tax due on removable contents.
3.2 Charging for connecting caravans to main services (electricity, gas, water and sewerage)
As a park owner you may charge caravan owners to connect their caravans to the mains services available at their pitches.
If you charge for connection to gas or electricity and can identify the actual consumption of users (in this instance through metering at the individual pitch), the connection fee will be reduced rated. If it’s not possible for you to identify the actual consumption of users, the liability of the connection fee will follow the liability of the caravan pitch — read paragraph 4.1 of this guidance.
If you charge for the connection to water and sewerage, this will be zero rated if it’s possible for you to identify the actual consumption of users (in this instance through metering at the individual pitch). If it’s not possible for you to identify the actual consumption of users, the liability of the connection fee will follow the liability of the caravan pitch.
The connection fee does not include general maintenance or provision of the infrastructure which supplies the utilities to the pitch itself. Read paragraphs 4.1 and 4.5 of this guidance for information about charges for infrastructure and maintenance.
3.3 Charging for the delivery, unloading and positioning of caravans
When you supply a caravan you may make a charge to the purchaser for delivering, unloading and positioning it. Providing the charge is reasonable, it will form part of the consideration for the supply of the caravan and the VAT treatment of the charge will follow the liability of the ‘delivered’ caravan (read paragraph 8.6 of this guidance if you use the method in paragraph 8.2 to calculate VAT due on the sale of a caravan). This will be the case regardless of whether the supply is made by the manufacturer, dealer or site owner.
If you merely provide a delivery service (unconnected with the supply of the caravan) it’s standard rated.
3.4 Commission on sales of second-hand sited caravans
A caravan owner may sell a caravan ‘on site’ at your park to which you’re entitled to commission under the Mobile Homes Act 1983 (as amended), Caravan Act (Northern Ireland) 2011 or the terms of the licence agreement (contract). The commission you receive is to be treated as additional payment for the pitch and follows the liability of the pitch fee or rent.
You may make an additional charge to the seller in connection with the sale. This may be extra to the ‘commission’ allowed (for agency services and so on) by the pitch agreement. If you do this, the additional charge is standard rated.
Charges made to dealers, allowing them to place caravans which have been sold on an owner’s site, are standard rated. Where the charge is passed on to the caravan purchaser it’s treated as part of the dealer’s costs and forms part of the consideration for the caravan. The VAT treatment will follow the liability of the caravan.
3.5 How to treat fees received from a third party
You may receive a commission from a caravan manufacturer or dealer for the sale of the caravan. The supply is standard rated.
3.6 The supply of skirtings
The provision of a skirting is generally integral to the agreement to supply a caravan. It follows the liability of the supply of the caravan.
The input tax that’s attributable to these supplies should be determined accordingly.
4. Supplies associated with caravan pitches
4.1 Liability of a caravan pitch
Pitch fees or rents received for the granting of the right to caravan owners to keep their caravans on pitches are either exempt or standard rated. Broadly speaking, the intention of the law is to exempt pitches for caravans used as principal private residences.
When deciding the liability of your supply, the following provision of pitches are standard rated:
- on holiday or leisure sites, regardless of how they’re used, except for those pitches occupied by employees of site operators as their principal private residences
- for restricted occupancy periods, unless the site is exempt
The following provision of pitches are exempt:
- on permanent residential sites where caravans can be lived in at all times throughout the year
- on sites for travellers where the caravans are used as principal private residences
- on sites that are not advertised or held out for holiday or leisure use where the pitch is intended to be used as the occupant’s principal private residence even where there is a short period of restricted occupancy
- on any type of site (including holiday or leisure sites) if the pitch is occupied by a warden or other employee of the site operator as their principal private residences
Holiday or leisure site
In determining whether a site is a ‘holiday or leisure site’, HMRC will have regard to the way that the site is held out or advertised. In most cases, it will be clear from advertising material if a site is operated for holiday or leisure purposes.
Restricted occupancy period
A pitch is for a ‘restricted occupancy period’ if it’s either provided for less than a year or is subject to an occupancy restriction.
Occupancy restriction
An ‘occupancy restriction’ is any covenant (for example, agreement or term in a contract), statutory planning consent, site licence or similar permission, the terms of which prevent the person to whom the pitch is provided from occupying it by living in a caravan at all times throughout the period for which the pitch is provided (such as a condition that says ‘no caravan shall be lived in during February’).
Permanent residential and holiday or leisure sites
In the case of mixed use sites any references to:
- holiday or leisure sites include holiday or leisure parts of mixed use sites
- permanent residential sites include permanent residential parts of mixed use sites
Principal private residences
HMRC will accept that a caravan is intended for use as a principal private residence if the site owner holds evidence such as:
- proof of listing on the Valuation Office Agency’s Council Tax register
- evidence that the occupier has received housing benefit to help with the pitch fee
- agreements or contracts that indicate that the caravan is intended to be used as the occupant’s principal home
Pitch agreements impose certain obligations upon site owners such as the construction of pitches, bases and the park infrastructure. If you raise a one-off charge which is directly related to these obligations it will follow the liability of the supply of the pitch.
The input tax that is attributable to these supplies should be determined accordingly. For information about input tax attribution, read Notice 706: partial exemption.
4.2 The treatment of charges for electricity and gas
Providing you can identify the actual consumption of users (in this instance through metering at the individual pitch) you may account for VAT on supplies of electricity and gas to caravans at the reduced rate. If this is not possible, the liability must follow that of the main supply of the pitch rental (as explained in paragraph 4.1 of this guidance).
Optional hook up charges to electricity and gas services for touring caravans or motor homes and touring boats will be subject to VAT at the reduced rate. Any charge which is not optional forms part of the overall pitch fee which is standard rated.
4.3 The treatment of charges for water and sewerage
Providing you can identify the actual consumption of users (in this instance through metering at the individual pitch), you may account for VAT on water and sewerage at the zero rate. If this is not possible, the liability must follow that of the main supply of the pitch rental (as explained in paragraph 4.1 of this guidance).
Optional hook up charges to water and sewerage services for touring caravans or motor homes will be zero rated. Any charge which is not optional forms part of the overall pitch fee which is standard rated.
4.4 The liability of local authority charges
Where a caravan is used as a person’s sole or main residence, it will generally be subject to Council Tax, for which the resident or owner of the caravan or park home will be liable.
Caravans on seasonal or holiday parks will not be subject to Council Tax (unless used as a person’s sole or main residence). Instead, the owner of the caravan site will be liable to pay non-domestic rates for the whole site.
If, as a site owner, you pass on the cost of non-domestic rates to individual caravan owners, the recharge will form part of the pitch fee or rental and will be standard rated.
4.5 The liability of service charges
Where you’re making charges to individual caravan owners, treatment varies according to whether they apply to:
- the general upkeep and maintenance of the caravan park as a whole (its common areas) in which case they’re part of the overall consideration for your supply of the pitch and follow its liability
- specific services provided to particular residents in which case they’re normally treated as standard rated
4.6 Payments for insurance services
The premium you pay to an insurer to cover your general liability or risks as a park owner is exempt.
However, if you recover this cost by making a separate charge to your caravan owners for ‘insurance’, the charge is treated as part of the overall consideration for your supply of the pitch. It follows the liability of the pitch fee or rent.
As the park owner you may be asked by a caravan owner to arrange insurance cover for the caravan owner’s risks on his or her behalf. Any charge which you make, or commission that you earn, for arranging the insurance will be exempt from VAT, provided the caravan owner is the recipient of the supply of insurance made by the insurer. Read Notice 701/36: insurance for further information on this.
Any payments received in relation to the renewal of existing policies will follow the liability of the original supplies.
4.7 Fees for reservation and premiums
Fees which you charge to reserve a pitch at your caravan park are part of the consideration for the pitch and follow the VAT liability of the pitch fee. This is the case regardless of whether you make the charge to the caravan owner, purchaser or to a third party who’s acting on behalf of the caravan owner or purchaser.
5. Supplies of accommodation in caravans
5.1 Holiday accommodation
Your supply will be standard rated if you provide accommodation in a caravan that’s:
- sited on a park advertised or held out for holiday use
- let to a person as holiday accommodation
5.2 Off-season letting at holiday sites
If you provide accommodation in a caravan during the off-season, you may treat your supply as exempt from VAT provided:
- it’s let to a person as residential accommodation
- it’s let for more than 28 days
- holiday trade in the area is clearly seasonal
You should keep a copy of the tenancy agreement or similar evidence to show that the accommodation was occupied for residential purposes only. In such cases the whole of the let including the first 28 days should be treated as an exempt supply.
The holiday season normally lasts from Easter to the end of September, but areas are not regarded as having a seasonal holiday trade if in practice it’s common for tourists or holiday goers to come and go at all times throughout the year. This is likely to be the case, for example, in places of historical interest which attract tourists for reasons not dependent on good weather.
5.3 Residential accommodation
Your supply will be exempt if you provide accommodation in a caravan that’s:
- on a site designated by the local authority as for permanent residential use
- let to a person as residential accommodation
6. Miscellaneous
6.1 How to treat supplies of car parking and garage fees
If you supply a garage or parking space in conjunction with the supply of a permanent residential caravan pitch your supply is exempt providing:
- you retain ownership of the land on which the garage or parking space is sited
- the garage or parking space is reasonably close to the caravan pitch
In all other circumstances supplies of garages and parking are standard rated.
6.2 How to treat the storage of touring caravans
The storage of touring caravans is always standard rated. This applies whether or not a specific area of land is granted to the caravan owner and includes contracts where the period of storage is more than one year.
6.3 Costs charged for the development and maintenance of common areas
Where costs relating to the development or maintenance of the common areas of the park are incurred, such as the installation of street lighting, resurfacing of roads, planting of trees and erection of fences, these will relate exclusively to the supply of the pitches and the recovery of the input tax will depend on whether the site is a residential or holiday site.
The input tax that is attributable to these supplies should be determined accordingly. For information about input tax attribution, read Notice 706: partial exemption.
6.4 Other charges
There are other charges that you may make to caravan owners.
These include:
- holiday booking services
- off-season storage and security (on-pitch or off-pitch)
- club membership
- repair and maintenance of caravans
- draining of water systems
They’re all standard rated.
7. The VAT treatment of houseboats
7.1 Definition of a houseboat
A houseboat is defined for the purposes of VAT as being a floating decked structure which:
- is designed or adapted for use solely as a place of permanent habitation
- does not have the means of, and which is not capable of being readily adapted for, self-propulsion
7.2 Self-propulsion
This term refers to any vessel that is either:
- independently propelled
- not independently propelled but could readily be adapted to be capable of self-propulsion, for example by installing an engine, propeller or mast
It’s unlikely that a vessel such as a barge or a yacht would be regarded as a houseboat for the purposes of VAT because they’re unlikely to lend themselves to being readily adapted.
7.3 How to treat the sale of a houseboat
If you sell a houseboat or let it on hire for towing away to a mooring of your customer’s choice your supply is zero rated.
Otherwise, the sale of a boat, which is not a houseboat is normally standard rated.
7.4 Fixtures, fittings and removable contents
These are treated in the same way as caravans — read paragraph 3.1 of this guidance.
7.5 Supplies of accommodation in houseboats
If you let accommodation in a houseboat already sited at a mooring, the VAT treatment is the same as for caravans — read section 5 of this guidance.
7.6 Moorings for houseboats
If you supply a mooring for a houseboat the mooring is exempt.
If you supply a mooring for any other type of vessel, then your supply is standard rated unless it qualifies for zero rating as explained in Notice 744C: ships, aircraft and associated services.
7.7 Charges for delivery, installation on site and connection to mains services
The VAT treatment is the same as for caravans — read paragraphs 3.2 and 3.3 of this guidance.
7.8 Garages and parking spaces provided with houseboat moorings
The supply of a garage or parking space to the owner of a houseboat is exempt if:
- you’re supplying it together with the mooring
- it’s reasonably near to the mooring
8. Removable contents in new or second-hand zero-rated caravans and houseboats
Although reference in this section is made specifically to caravans you can also apply the guidance to the removable contents of zero-rated houseboats.
8.1 General
Removable contents, when supplied with or as part of a zero-rated caravan, are standard rated, unless those contents are of a kind ordinarily incorporated by builders as fixtures in new dwellings (read paragraph 3.1 of this guidance). Paragraphs 8.2 and 8.3 explain how you arrive at the value for tax of the removable contents. You do not have to use any of the methods shown but, if you do use a different method, it must still give a fair and reasonable result and will be subject to inspection by HMRC.
You can find further examples of available methods in Notice 700: the VAT guide.
Paragraph 8.6 of this guidance tells you how to deal with other items included in the selling price of both new and used caravans.
8.2 New caravans
You can arrive at a value for the standard-rated removable contents of a new caravan by reference to the costs you have incurred. The following examples show how standard-rated removable contents in a caravan which you have bought from a manufacturer for immediate resale may be valued.
You buy a caravan from a manufacturer. Calculate its cost as follows.
- Apply VAT in the same proportion of the sale price as it was of the cost price. Multiply the sales price by the VAT incurred on the purchase, then divide by the cost price.
- Calculate a precise value for each of the standard-rated removable contents. You must keep documentary evidence to support each valuation.
If you add further removable contents to those provided by the manufacturer or take out some of the removable contents provided before selling a caravan, you must add or subtract these costs as appropriate, before making this calculation.
If you advertise the caravan and the removable contents at separate prices and the customer is entirely free to purchase the vehicle at the lower price without the removable contents, then the charges for the removable contents may be treated separately for VAT purposes. This is because there are separate supplies of the caravan and the removable contents each with their own consideration.
8.3 Used caravans
Whichever method you adopt you must apply it consistently and not alternate between methods when calculating the tax due on each of your supplies.
To deal with VAT on removable contents you may use either:
- actual values — calculate a precise value for each of the standard-rated removable contents and keep documentary evidence to support each valuation
- standard apportionment of values — HMRC accepts that the value of the standard-rated removable contents in a used caravan can be taken to be 10% of the tax-exclusive selling price of the complete caravan
8.4 Margin scheme for the sale of used caravans
VAT is normally due on the full value of the removable contents within zero-rated or reduced-rated caravans. However if you buy and sell used caravans you do not have to account for VAT on the full value of the removable contents but may use the margin scheme to calculate and account for VAT on the difference (or margin) between your buying price and selling price for the removable contents. If no margin is made (because the purchase price is equal to or exceeds the selling price) then no VAT is payable.
For more information about the margin scheme, including the records you’re required to keep and the conditions that must be met you should refer to the global accounting VAT margin scheme.
8.5 Margin scheme
You may use the margin scheme for the sale of used caravans if you meet the conditions of the scheme. If you use a margin scheme in conjunction with the apportionment method (described in paragraph 8.3 of this guidance) you may apply the 10% apportionment to the margin rather than the full selling price. The margin will always be tax inclusive, you should the VAT as follows:
- margin on the sale of caravan including any charges for delivery
- multiply by 10% then multiply by one sixth
For reduced-rated caravans you then need to calculate the output tax due on the rest of the margin on the caravan.
- the remaining 90% of the margin calculation represents the value of the caravan element
- multiply this by 1/21 to calculate the 5% VAT due on the caravan element
- add the VAT due on the removable contents to the VAT due on the caravan element to calculate the total VAT due on the margin scheme sale
If you adopt an alternative method, it must produce a fair and reasonable result.
8.6 Other charges included in the selling price
As explained in paragraph 3.3 of this guidance, charges made at the time of supply of the caravan for delivery, unloading and positioning are regarded as part of a single supply of the caravan, and form part of its price. This also includes incidental expenses directly linked to the sale and any accessories fitted before the sale. If you use any apportionment method, you should make the calculation on the total of all such amounts. Other charges, such as reservation fees, premiums, pitch fees or commissions should be excluded from the calculations.
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Updates to this page
Last updated 3 October 2024 + show all updates
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Section 2.2 has been updated to highlight a recent amendment to VAT law relating to British Standard 3632.
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The temporary reduced rate of 5% that was applied to tourism and hospitality has been corrected to July 2020.
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The temporary reduced rate which applied to tourism and hospitality ended on 31 March 2022. From 1 April 2022 the normal VAT rules apply, and VAT should be charged at the standard rate.
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The government extended the reduced rate of VAT for tourism and hospitality.
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Information on the reduced rate of VAT for tourism and hospitality has been added.
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First published.