Pie Tax horror announced in Budget

[I1L2T3]

The holiday park would recover the VAT on the manufacturer's invoice directly from HMRC when they submit their VAT return. They would have to add VAT to any sales of static caravans, so the cost would be with the end user.

 

It would have no effect on holiday rentals and timeshares.

 

I find it funny because I find it unbelievable. It takes an exaggerated doom-laden view of one side, but ignores to positive aspect of the other side of the economic balance. People aren't going to stop holidaying in Cornwall if VAT is added to caravans, which is what the article suggests.

 

Your repeated use of ad-homs is a bit tedious.

 

I never said people would stop holidaying anywhere. But is likely that increased rental prices, for example, could have led to less people holidaying. It's very simple to understand.

 

What is the positive aspect of damaging already fragile industries?

[Darth Vader]

The super rich spend thier money and create employment in this country. To tax them as the old LABOUR party did drives them out of the country and we all lose.

 

We should seek to encourage the wealthy to base themselves here, we should make UK a tax friendly domicile for the rest of the world.

 

So called "essential" services are over staffed, over funded, ill used, and unnecessary.

 

Wrong. Their greed necessitates large scale unemployment. They expect everything for nothing as a right, so they do not spend in this country. They spend on foreign shores and count their fortunes amassing in tax havens. They set the highest possible prices until everyone else has nothing left but to spend on the ridiculously overpriced essentials; food, gas, electricity, water....

[MrSmith]

The problem is that the zero VAT exemption was only meant to apply to static caravans that were used as residential homes and not uses as holiday homes, towing caravans and some static caravans (generally the cheaper ones) have normal VAT applied and it make sense to apply VAT to the more expensive holiday static caravans. It was a loophole that manufactures have exploited and they can also claim back the VAT they pay on the materials, the exemption should only be applied to residential caravans. I don’t see how it would affect holiday prices because the holiday caravans already exist; it doesn’t affect the cheaper caravans because they aren’t VAT exempt anyway. The VAT would only bring the new more expensive caravans in line with the rest, so it’s the price of the more expensive holiday caravan holidays that would gradually increase over time as the parks slowly replace their stock.

 

http://www.hmrc.gov.uk/budget2012/vat-con-4801.pdf

 

I agree that it is best to gradually increase the VAT over several years to avoid a large increase all at once.

[I1L2T3]

The problem is that the zero VAT exemption was only meant to apply to static caravans that were used as residential homes and not uses as holiday homes, towing caravans and some static caravans (generally the cheaper ones) have normal VAT applied and it make sense to apply VAT to the more expensive holiday static caravans. It was a loophole that manufactures have exploited and they can also claim back the VAT they pay on the materials, the exemption should only be applied to residential caravans. I don’t see how it would affect holiday prices because the holiday caravans already exist; it doesn’t affect the cheaper caravans because they aren’t VAT exempt anyway. The VAT would only bring the new more expensive caravans in line with the rest, so it’s the price of the more expensive holiday caravan holidays that would gradually increase over time as the parks slowly replace their stock.

 

http://www.hmrc.gov.uk/budget2012/vat-con-4801.pdf

 

I agree that it is best to gradually increase the VAT over several years to avoid a large increase all at once.

 

Indeed that is the Treasury spin. It's a weak argument because it supposes that since 1973 some massive loophole on holiday static caravans has been accidentally left in place. The truth is the zero VAT would have been re-assessed on a yearly basis by governments of every flavour since then. And they had all decided not to change the tax. And nobody could argue they didn't realise the effects on static caravan manufacturing and tourism. That is where we are, whether that is right or wrong no government until recently has sought to change it.

 

The case for introducing it seems to rest on removing anomalies from the system, nothing more. The estimated revenue was £45m over 5 years but the KPMG report suggested £1bn would be taken out of the economy over the next 5 years, that manufacturing industry would be damaged and that the tourism economy would be damaged. I think that the case is compelling because rightly or wrongly that is the situation we now face.

 

For all my arguments about this I've no special attachments to static caravans. I don't own one. I don't holiday in them. I never intend to. I would be making the same arguments about any industry that faced serious damage because of an extremely ill thought-out change to the taxes affecting it.

 

Nobody has made any kind of strong economic case to support the introduction of the tax. I would like to hear it.

[ricgem2002]

The super rich spend thier money and create employment in this country. To tax them as the old LABOUR party did drives them out of the country and we all lose.

 

We should seek to encourage the wealthy to base themselves here, we should make UK a tax friendly domicile for the rest of the world.

 

So called "essential" services are over staffed, over funded, ill used, and unnecessary.

no the super rich have accountants who get them to pay as little as tax possible :hihi: whats the rate of tax you pay again

[HeadingNorth]

Indeed that is the Treasury spin. It's a weak argument because it supposes that since 1973 some massive loophole on holiday static caravans has been accidentally left in place.

 

Who says it was accidental? The mere fact that it is a loophole is proof that it should be removed.

[I1L2T3]

Who says it was accidental? The mere fact that it is a loophole is proof that it should be removed.

 

I don't agree that it was a loophole. And I never said it was. It was a formalised, fully-documented and deliberate feature of the VAT regime.

 

The opponents of it like to pretend it was a loophole of course

[MrSmith]

I don't agree that it was a loophole. And I never said it was. It was a formalised, fully-documented and deliberate feature of the VAT regime.

The opponents of it like to pretend it was a loophole of course

Yes it was and its intension was to be used for a certain type of caravan that was designed for residential use, it becomes a loophole when the caravans are used for holiday lets or bought as holiday homes, which should have VAT added.

[I1L2T3]

Yes it was and its intension was to be used for a certain type of caravan that was designed for residential use, it becomes a loophole when the caravans are used for holiday lets or bought as holiday homes, which should have VAT added.

 

A loophole that stayed in place for 39 years? Really? Reviewed frequently, fully documented as part of the VAT regime?

 

I agree that when the VAT was waived initially it may have been for more specific reasons. But then it will have become clear that it had other economic benefits. Then government after government agreed to keep the waiver in place and each of them would have known about the impact on manufacturing and tourism. This was made absolutely clear by Peter Lilley in 1989:

 

http://www.streetsweb.co.uk/about-us/hot-topics/the-implications-of-imposing-vat-on-caravan-tax

 

In 1989, Peter Lilley, the then Economic Secretary to the Treasury said, ‘There is no question of withdrawing zero-rating from the purchase of static caravans.’ So, far from correcting an anomaly, it is actually anomalous of the Government to attempt to change what they had previously decided most deliberately to do, treat static holiday homes as zero rated for VAT purposes.

 

I repeat, not a loophole.

[quisquose]

I1L2T3 seems to be placing a lot of emphasis on the KPMG report. Who paid for this report I wonder?

 

About 15 years ago I worked for an insulation company, and did some work in conjunction with the The Association for the Conservation of Energy in preparing arguments for reducing VAT on energy saving materials.

 

ACE claims to exists to reduce overall energy demand to ensure a secure and sustainable energy future, in reality it exists purely to defend and promote the interests of it's members. It's members are commercial organisations that sell stuff, they don't share the lofty claims of the lobby group that they pay to represent them.

 

The reason I mention it is that I was involved in a political lobbying process that made unaudited, unsubstantiated, exaggerated claims about the impact of a VAT reduction and energy efficiency that I knew was no more than lies. Since then I am always sceptical of claims made by lobby groups, even those rubber stamped by a firm of accountants.

 

I think the economy would be better served if we operated a much simpler tax regime. Our's is one of the most complicated, if not the most complicated, tax systems in the world, and is one of the biggest deterrents to starting a business in the first place. Everybody agrees that we need to simplify it, but too many people want to defend their preferential treatment which complicates it.

 

My opinion is that the decision to remove the anomaly on static caravans and pasties was correct. It would have been a simplification, and I can see no reason why businesses selling caravans and pasties should have an unfair tax advantage over businesses selling conservatories and hamburgers. Any concerns about job losses in deprived areas can be addressed by other methods.

 

However, since I1L2T3 was keen to compare the tax on static caravans with the tax on holiday homes earlier I will concede his comparison, and say that I have no problem with the same treatment for both. It would be fair (for I1L2T3), and simple (for me), if static caravans are taxed the same as holiday homes and purchasers of static caravans are charged stamp duty and pay council tax on the same basis.