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At the time of year when taxpayers traditionally plan their summer holidays, HMRC have announced forthcoming VAT changes that will affect some popular leisure pursuits.
An extra statutory concession (ESC) on sailaway (unfitted) boats will be abolished on 1 January 2012, when three ESCs concerning VAT on caravans will also come to an end.
The Revenue is currently reviewing its concessions; the majority are to be retained but a minority will be axed for being outside the scope of the department’s administrative discretion. It has not been possible or appropriate for the taxman to legislate the ESCs because they are contrary to European law.
From the beginning of next year, VAT-registered businesses will no longer be able to zero rate the supply of sailaway boats to UK residents with the intention of keeping them outside of the EU.
Firms will, however, be allowed to continue to zero rate the supply of the bare vessels to UK residents on the condition that they personally make all arrangements for export.
The three VAT concessions for caravan owners that will cease to apply are:
- the recharge of business rates as outside the scope of VAT;
- zero rate water and sewerage charges where actual consumption cannot be identified; and
- first-time connection to utilities as zero rated for VAT.
HMRC are discussing the impact of the changes with the boat industry and bodies that represent caravanners. Businesses that will be affected are to be allowed a 12-month period of notice before the concessionary treatments formally draw to an end.
