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VAT on sale of Ex-Fleet Caravan

Quick question. I have a client who operates a caravan park. They bought a new caravan to hire out. The caravan was let out to random people for say 2 years. They now want to sell it on. How do I account for VAT on that sale?

Am I right that it's now a used caravan and therefore apply the 7/407 ratio as I do with other used caravans that they sell?

Does the fact that the caravan had been capitalised on their balance sheet make any difference to the VAT calculation?

Thanks in advance for your help.

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25th Jul 2010 08:23

Did They Reclaim VAT on the Purchase?

Did they reclaim VAT when the caravan was purchased? According to paragraph 2.3 on the web page below

"you must have acquired the goods in eligible circumstances. In most cases, this means that you obtained the goods for resale in circumstances where you could not claim any VAT back (see paragraph 2.9)"

Paragraph 2.9 says

"You can only use a margin scheme if both

the item, andthe circumstances in which you bought it

are eligible. Eligible circumstances are those in which you were not charged VAT when you purchased the item.

The most common ones are:

where you buy the goods from a private individual or an unregistered business which does not have to charge VAT to you, andwhere you buy the goods from another business which is selling them on to you under a margin scheme.

If you have bought an item and VAT is shown separately on the purchase invoice, you can’t sell that item on under a margin scheme, even if you haven’t claimed the VAT back."

 

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

 

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26th Jul 2010 08:57

Not Sure - Will Check

Hi,

Many thanks for your reply. I don't deal directly with this client so I'm unsure over the input VAT claim. I'd imagine they have so does that mean we'd have to apply the same apportionment as the cost on the sale?

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26th Jul 2010 09:03

What type of Caravan.

I'm assuming you're already au fait with the rules on caravans, but just thought I'd put it in in case.

This is presumably a road going, towable, caravan? I just ask because most parks I've seen tend to use static caravans that are too big for being legally towed, and this type of caravan is zero rated under Group 9 to Schedule 8 of the VAT Act 1994, and so wouldn't have VAT charged whatever.

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26th Jul 2010 09:24

Static

It's a static caravan and it would be zero rated except for the white goods element.

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Well...

If they have reclaimed the input VAT on the removable fixtures and fittings (and I can't see why they wouldn't have done so), then the caravan isn't eligible for sale the margin scheme.

VAT would be chargeable on the sale using either actual values for each of the standard-rated removable contents (provided you can produce adequate documentary evidence to support each valuation), or by standard apportionment. If the caravan is being sold at a VAT-inclusive price then the VAT element would be calculated using the 7/407 fraction you suggest (as agreed between HMRC, the National Caravan Council Ltd and Home Parks Association Ltd), whereby the value of the standard-rated contents are taken as 10% of the tax-exclusive selling price of the whole caravan.

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