VATWatch - October 2024
HMRC Policy Paper –
Zero VAT Rating for Residential Caravans
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 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 as such HMRC consider it is now 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.
Specific references to the 2005 and 2015 versions of the standard will be removed 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.
This is likely to affect manufacturers, retailers and suppliers of residential caravans and people buying them for residential use.
The VAT Treatment of Sightseeing Passes -
The Go City Limited Case
The question of exactly how VAT should be applied to Sightseeing Packages and passes has been raised in the First-Tier Tribunal case of Go City Ltd. The issue being, should passes (“sightseeing packages”) sold by the appellant be outside the scope of VAT as multi-purpose vouchers (MPVs) or whether they function as a ticket? The difference being the time of supply.
Go City Ltd enables buyers of their passes to enter London attractions and travel on certain types of transport. The passes were sold at a price lower than the usual admittance price at the attractions and HMRC originally accepted that the supplies were of “face value vouchers” via The VAT Act, Schedule 10A, and latterly Schedule 10B, but later changed its view.
HMRC purported the difference in VAT treatment is essentially down to whether the voucher is single purposed (VAT is due on the value of the voucher when issued) or multi purposed (no VAT due when sold, if sold at or below their monetary value). They contended that the Go City Ltd passes were effectively a single-purpose voucher and as such output tax was due upfront. Conversely, Go City Ltd argued they sold multi-purpose vouchers and therefore tax was only due when the voucher was redeemed.
The appeal allowed. The Tribunal concluded that the passes were indeed multi-purpose vouchers and their sale was consequently outside the scope of VAT, as such no output tax was due at the time they were sold.
Read Marcus Ward’s commentary on this Tribunal via the link below:
ATT Comments on VAT and Private School Fees
The Association of Taxation Technicians (ATT) have proposed that standard rate VAT will be applied to any private school fees (including boarding) paid from 29 July 2024 in respect of terms starting on or after 1 January 2025.
Within submitted comments on a technical note and draft legislation ATT have expressed their main concern is the proposed commencement date does not give sufficient time for schools, or HMRC, to adequately prepare and deliver the proposed changes. They suggest that commencing part way through an academic year could also introduce additional difficulties for schools and pupils, and as such, consideration should be given to deferring commencement to September 2025.
They also suggest the proposal for ‘closely related’ supplies of goods and services to remain exempt should be revisited as they believe it could introduce complexity, increase the risk of value shifting and is not in keeping with established HMRC practice.
Thank you for taking the time to read this VATwatch round-up.
