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What does the VAT increase entail for lodge holiday homes?
The 2012 budget saw the government announce a change in the way that VAT will be assessed on holiday homes and lodges.
Currently VAT on holiday lodges is only applicable to the removable contents within it (such as chairs, tables, fridges, carpets etc). These often represent around 10% of the purchase price.
From April 1st 2013, VAT will be assessed at 20% for the removable contents and 5% for the remainder of the holiday lodge purchase price. This new law will increase the cost of purchasing a new holiday lodge, but the price hike isn’t as severe as first feared.
Initially, the government had proposed increasing the VAT on the purchase of static caravans, lodges and holiday homes to 20% across the whole of the purchase price. The change was introduced because of an inconsistency in the way non-permanent mobile homes were rated; touring caravans already are subject to VAT at 20%, while holiday homes, lodges and static caravans are not.
By closing this loophole the government had expected to generate around £45m by 2017, but many industry experts feared the change would damage the holiday home industry and cause job losses as demand for holiday homes fell due to the VAT increase making them too costly for many people.
The government u-turn is welcomed by all retailers of holiday caravans, homes and lodges as price increases will now be significantly lower than first thought – the following pages will talk you through what the changes mean if you are looking to purchase a new holiday lodge.
Cost implications of the VAT increase on holiday homes and lodges
The announcement that from 1st April 2013 VAT will be assessed at 20% for the removable contents and 5% for the remainder of the holiday lodge purchase price is going to have some impact on the cost of holiday homes and lodges.
Cost implications of the VAT increase on holiday homes and lodges
How to avoid the VAT increase
The only way to avoid the VAT increase is to buy your new holiday home or lodge before the rise comes into effect on April 1st 2013.
How to avoid the VAT increase
Insurance implications of the VAT increase
All lodge owners will need to consider the impact of the VAT increase on the amount of holiday lodge insurance they require.
Insurance implications of the VAT increase