In a significant development that could lead to substantial reimbursements for holiday park businesses, our specialist caravan park accountants have agreed with HMRC a new means of valuing removable contents sold as parts of caravans and lodges for VAT purposes.
This new calculation method has already resulted in one holiday park group receiving a re-imbursement of £400,000 and opens up the possibility for many others.
This agreement relates to the current “standard” approach where removable contents are valued at the same percentage of the selling price of the unit as they were during on purchase, regardless of whether the unit has increased significantly in value, and are mandatorily subject to VAT at 20%.
For example, if the contents were 15% of the purchase cost of the unit, they would represent 15% of the sales value of which VAT must be accounted for at 20%.
This has meant, that if a lodge was sold for £200,000 having been purchased for £75,000, the fridge, sofa and other removable contents inside the unit have - according to this previous approach - become almost three times as valuable in the time between purchase and sale.
We have spent a number of years devising a new calculation method to reflect the true value of these removable goods which has recently been accepted by HMRC as ‘fair and reasonable' and has already resulted in a six-figure reimbursement for one client.
The opportunity now exists for other sellers of caravans and lodges to submit up to four years of retrospective claims for overpaid VAT, as well as applying these efficiencies moving forwards.