Caravan owners can take some relief from the latest ruling by the Upper Tribunal (UT) which has allowed part of an appeal by HMRC against a First Tier Tribunal (FTT) decision on how to decide the VAT rate applicable to sales of static caravans, saying the FTT was wrong to state that the ‘removable contents’ of a caravan should be zero-rated
HMRC was appealing against the earlier decision of the FTT in Colaingrove Ltd [2013] TC 02715 in which the FTT held that certain items commonly supplied as part of the contents of a static caravan should be zero-rated for VAT purposes. HMRC argued that all of the items under consideration were standard rated.
In coming to its decision, the FTT took into account factors such as how easily items could be removed, what tools were needed to remove them, how much damage would be caused to the fabric of the caravan in removing them, and whether the caravan was ‘habitable’ or not without a particular item. Using this argument, the FTT stated that certain items, including a fixed mirror, various fitted storage units, a fitted oven and hob and glued down carpets were not removable contents and so were zero-rated.
However, the Upper Tribunal, in HMRC v Colaingrove Ltd [2014] UKUT 0132 (TCC), did not agree with the FTT’s approach, saying the test was simply to differentiate between the caravan as a ‘container’ and its contents. The issue of how easy or difficult it was to remove those contents or whether this would cause damage was held to be irrelevant. The tribunal said that all items introduced into the shell of a caravan were inherently removable and so standard rated.
The only exception to this was in respect of a number of items that fell within the ‘building materials’ category and so did qualify for zero rating, which is why HMRC's appeal was only partially successful. Under this approach, while the carpets and oven in the caravan were standard rated, the worktop was zero rated.
Sarah Arnold, CCH tax contributor, said: ‘In this case, the Upper Tribunal has found that the FTT's rather complicated method of deciding whether items incorporated in a static caravan were to be zero-rated within VATA 1994, Sch 8, Grp 9, or not, was incorrect.
The tribunal said that all items introduced into the shell of a caravan were inherently removable and so standard rated
'The test was simply as between contents or container and accordingly, all of the items considered were removal contents and, prima facie, standard rated, although HMRC's appeal was allowed in part only because zero-rated treatment was preserved in respect of a number of items that fell within the “building materials” exception’.
