The above Brief reminds caravan site owners and their customers about the forthcoming withdrawal of three Extra Statutory Concessions (ESCs) relating to caravan sites.

Last year HMRC announced its intention to withdraw three ESCs relating to caravan sites with effect from 1 January 2012 which will result in changes to the VAT treatment of:

• recharges of business rates at holiday/leisure caravan sites;
• recharges of non-metered water/sewerage rates at caravan sites; and
• one off charges for the first time connection to gas, electricity, water and sewerage.

The purpose of Brief 37/11 is to remind caravan site owners and their customers about the forthcoming changes. It also clarifies the effect of timing of invoices and payments on whether the concessions apply.

After taking legal advice, HMRC concluded that the three concessions that are subject of this Brief are beyond the scope of its discretion to make concessions. Furthermore, as EU law does not permit the UK to introduce new legislation to preserve the effect of these concessions, the concessions are therefore being withdrawn.

From 1 January 2012, the concessions will be withdrawn and the following VAT treatment will apply:

• recharges of business rates will follow the VAT liability of the pitch fee (standard rated in the case of holiday/leisure sites);
• recharges of water/sewerage costs which are not metered to the individual customer at their pitch will follow the VAT liability of the pitch fee (generally standard rated, in the case of holiday/leisure sites; exempt, in the case of residential sites); and
• one off charges for the first time connection to gas, electricity, water and sewerage will follow the liability of the pitch (exempt or standard rated) unless the site owner identifies and charges for individual consumption (that is, through metering to the individual pitch), in which case the charge will follow the liability of the utility (reduced rated for electricity and gas, zero rated for water and sewerage).

HMRC has also been asked to clarify the effect of the timing of invoices and payments and, for example, how to determine the VAT treatment when charges are made in 2011 that relate to services provided in 2012.

Detailed advice is contained in the Brief which can be accessed at http://www.hmrc.gov.uk/briefs/vat/brief3711.htm