A caravan longer than 7 metres or wider than 2.55 metres is zero rated when sold if it is built to a version of BS3632 that came into effect on or after 17 June 2005; a caravan over those sizes not built to that standard is reduced rated at 5%, and smaller caravans are standard rated. A houseboat, meaning a floating decked structure designed solely for permanent habitation that cannot readily be made self propelled, is zero rated on sale. In both cases removable contents such as furniture, carpets and appliances are standard rated, and holiday lets and holiday site pitches are standard rated, while residential pitches and houseboat moorings are exempt.
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What counts as a caravan for VAT?
The VAT legislation does not define a caravan, so HMRC follows the caravan sites legislation. VAT Notice 701/20, paragraph 2.1, describes a caravan as a structure designed or adapted for human habitation that, once assembled, can physically be moved by towing or on a vehicle, and is no more than 20 metres long (excluding any drawbar), 6.8 metres wide and 3.05 metres high measured internally. A twin unit of no more than two sections bolted or clamped together on site can qualify if it remains movable once assembled.
To be designed for habitation it must be self contained living accommodation with washing facilities and the means to prepare food. HMRC treats mobile homes, residential park homes, static caravans and holiday lodges as caravans, but not motor caravans. A structure that fails the tests may instead be a building, whose first sale or long lease may be zero rated under Notice 708.
When is a caravan zero rated?
The rate turns on size and construction standard. The zero rate comes from Schedule 8, Group 9, and the reduced rate from Schedule 7A, Group 12, of the VAT Act 1994 (Notice 701/20, paragraphs 1.3 and 2.2).
| Caravan | VAT on supply |
|---|---|
| Does not exceed 7 metres long or 2.55 metres wide | Standard rated (20%) |
| Exceeds either measurement, not built to a version of BS3632 in effect on or after 17 June 2005 | Reduced rated (5%) |
| Exceeds either measurement and built to such a version of BS3632 | Zero rated |
| Second hand caravan occupied before 6 April 2013 | Zero rated |
Measurements exclude towing bars and similar fittings. Otherwise a second hand caravan follows the same tests as a new one. Paragraph 2.3 says a supply includes selling the caravan, leasing it long term where the lessee can take it to a park of their choice, lending it free of charge and diverting it to the supplier’s own use. The rate on the sale depends on these physical tests; the use of the pitch it sits on is dealt with separately below.
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Which contents and extras are standard rated?
Zero rating extends only to goods a builder would ordinarily fit in a new house. Notice 701/20, paragraph 3.1, lists sinks, baths, WCs, fixed partitions and water heaters as zero rated, and tables, chairs, mattresses, seat cushions, fridges, carpets and washing machines as standard rated. The price of a zero rated caravan therefore has to be split.
- New caravans: paragraph 8.2 allows a dealer to value the contents by reference to cost, applying VAT in the same proportion of the sale price as it bore to the cost price, or to value each item precisely with supporting evidence.
- Used caravans: paragraph 8.3 allows actual values or a standard apportionment of 10% of the tax exclusive selling price, applied consistently.
- Margin scheme: dealers in used caravans can account for VAT on the contents on the margin rather than the full value, applying the 10% to the margin (paragraphs 8.4 and 8.5). See VAT margin scheme and global accounting.
Reasonable charges for delivering, unloading and positioning the caravan follow its liability, as do skirtings; a delivery service unconnected with a sale is standard rated (paragraphs 3.3 and 3.6). If contents are priced separately and the buyer is free to take the caravan without them, they are a separate supply.
When is a houseboat zero rated?
Notice 701/20, paragraph 7.1, defines a houseboat as a floating decked structure designed or adapted for use solely as a place of permanent habitation that has no means of self propulsion and is not readily adaptable for it. Paragraph 7.2 says a vessel that could readily be fitted with an engine, propeller or mast is self propelled, so a barge or yacht is unlikely to qualify. Selling a houseboat, or hiring it out for towing to a mooring of the customer’s choice, is zero rated; selling any other boat is normally standard rated (paragraph 7.3).
Contents are treated as for caravans. A mooring for a houseboat is exempt, and so is a garage or parking space supplied with it if reasonably near; moorings for other vessels are standard rated unless they qualify for zero rating under Notice 744C (paragraphs 7.6 and 7.8).
How do holiday caravans and houseboats differ?
The sale of the unit follows the tests above, but occupation is treated differently:
- Holiday accommodation. Letting a caravan sited on a park held out for holiday use, or letting it as holiday accommodation, is standard rated (Notice 701/20, paragraph 5.1). Lettings in a houseboat already at its mooring are treated the same way (paragraph 7.5). See VAT on holiday accommodation.
- Off season lets. Paragraph 5.2 allows exemption for a residential let of more than 28 days at a holiday site where the holiday trade is clearly seasonal, normally Easter to the end of September. The whole let, including the first 28 days, is then exempt.
- Residential lets. Accommodation in a caravan on a site designated for permanent residential use and let as residential accommodation is exempt (paragraph 5.3).
- Pitches. Paragraph 4.1 makes pitches on holiday or leisure sites standard rated regardless of how they are used, apart from those occupied by site employees as their main home. Pitches on permanent residential sites where caravans can be lived in all year, sites for travellers, and sites not held out for holiday use where the pitch is the occupant’s main residence are exempt. Evidence of a main residence includes council tax listing, housing benefit towards the pitch fee or an agreement showing the caravan is the occupant’s main home.
Pitch related charges follow the pitch, including reservation fees, sale commission under the Mobile Homes Act 1983 and service charges for common areas. Metered electricity and gas are reduced rated and metered water and sewerage zero rated; unmetered supplies follow the pitch. Storage of touring caravans is always standard rated (paragraphs 3.4, 4.2 to 4.7 and 6.2). Building a new residential caravan park can also be zero rated under Notice 708, section 20, but a holiday park normally is not.
How does this work in practice?
Illustration only. A dealer sells a used static caravan, 11 metres by 3.7 metres, first occupied in 2010, for £30,000 excluding VAT, including furniture and appliances. Because it was occupied before 6 April 2013 it is zero rated. Using the 10% apportionment, £3,000 is treated as standard rated contents, so the dealer accounts for £600 of VAT.
The buyer then pays an annual pitch fee to a park advertised for holiday use. That fee is standard rated even if the buyer spends most of the year there, because the site is held out for holiday or leisure use. If the same caravan had been 6.5 metres long and 2.4 metres wide, the whole sale price would have been standard rated whatever its age.
What mistakes come up most often?
- Zero rating the full price of a caravan, including furniture and appliances.
- Assuming every large static caravan or lodge is zero rated without checking the BS3632 standard, when a non compliant one is reduced rated.
- Treating motorhomes as caravans.
- Exempting pitch fees on a holiday park because a particular owner lives there.
- Treating a narrowboat or barge with an engine as a houseboat.
- Charging VAT on a houseboat mooring, which is exempt.
The capital gains position for someone living in a caravan or houseboat is covered in private residence relief for caravans and houseboats.
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Related Accountapedia entries
- Can a caravan or houseboat qualify for PRR
- Do you charge VAT on residential rent
- Residential Property Developer Tax
- Residential conversions: the reduced VAT rate
- Tax on letting caravans, lodges and glamping pods
Sources
- GOV.UK: Vat treatment of caravans and houseboats notice 70120
- GOV.UK: Hotels holiday accommodation and vat notice 7093
- GOV.UK: Buildings and construction vat notice 708
- GOV.UK: Vat notice 7001 should i be registered for vat
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.