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Thursday, 30 October 2014

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Government should rethink caravan tax levy, says Cumbria association chief

Holiday parks in Cumbria are preparing to fight government plans to introduce VAT on static caravans.

Caravan owners photo
Tom and Janet Greenwood

Local firms say that if the proposal goes ahead, as revealed by the Chancellor George Osborne in his recent budget, then it will be a blow to the county’s tourism trade.

The Government plans to introduce a 20 per cent levy on static caravans from October 1. They are currently VAT-free.

Park owner Henry Wild, of Skelwith Fold caravan park, in Ambleside, says that jobs could also be lost if the move makes holidays too expensive for some people.

Mr Wild is director of the Cumbria branch of the British Holiday and Home Parks Association (BHHPA). Earlier this week he chaired a meeting for owners of the county’s 90-plus parks, as well as colleagues in Lancashire.

The new levy would mean the cost of caravan holiday homes could rise significantly in price overnight, ultimately forcing up the hire cost for families coming to visit Cumbria.

The hike would also affect the many buyers of holiday caravans on parks in Cumbria who form another important sector of the county’s tourism economy.

Touring caravans will not be directly affected, but it is argued parks could be forced to put up their prices if the static holiday home business falters.

Paul Holder runs the Dalston Hall Holiday Park and Golf Club, near Carlisle, with wife Elizabeth and sons Dion and Ricky. They also have a daughter, Kelly, who is at university.

The family bought the park five years ago and, after identifying a growing demand, invested in turning an adjoining field into a new luxury holiday home development for static caravans.

In total, on top of their touring plots, they now have about 30 static pitches filled across the site and hoped numbers would gradually increase as the credit crunch eased. But Mr Holder is now worried the Government’s VAT hike – which he says will add between £4,000 and £10,000 to an average caravan – will deter potential customers from investing.

“It could hit future sales – without a doubt. We don’t rent them but those businesses that do will have to put the cost on to their prices. It is going to put people off.

“There was no consultation. It came as a huge surprise. If we’d known this was coming I’m not sure we would have invested as much as we have done in the new site. Anyone and everyone in the trade is bound to be affected,” says Mr Holder, who is a member of the BHHPA.

“And it’s not just the parks directly. Without people coming to the area it will have a knock on effect on local communities. In Dalston itself we’ve got the local butcher, baker, the Co-op, the Bluebell pub – if people aren’t coming here they won’t be going into the village to spend their money in these shops. It will have all kinds of knock on effects.”

Until now the most expensive caravans on sale at Dalston Hall were about £63,000. But the 20 per cent VAT hike will mean that from October, anyone wanting to buy one of these models would have to shell out almost £10,000 extra – taking the cost to £73,000.

Tom and Janet Greenwood, from Pendle, near Burnley, started visiting Dalston Hall about 12 years ago in a touring caravan. Three years ago they decided to invest in a static caravan as a retirement venture and now visit regularly between March and October.

However the couple said that had the VAT increase been brought in back then, the extra cost would have made them think again. “It would’ve been a no-goer,” said Mr Greenwood. His wife added: “It’s going to be a terrible blow to the parks.”

Valerie and Robert Lugsden, from Northumberland, bought a nearby plot in 2010. They also agreed the price rise would have made them think again, or at least look for a smaller model. “I think it will hit the industry. People are stretched as it is.”

Mr Holder hopes that the pending VAT rise will encourage those who are interested to snap up a caravan before it comes into force on October 1. However if that doesn’t happen he fears the business could be left with empty plots next season. He added that in recent years, due to the economic downturn, more people have been holidaying in the UK, giving a much needed boost to the caravan and camping industry. But he believes that any price increase will just make them think again and go abroad.

Mr Wild, from the BHHPA, is now calling on the Government to rethink its policy, warning of the impact on the wider tourism industry.

“Even just a small fall-off in visitor numbers to this region could have a severe knock-on impact across the wider local economy. Many village shops, pubs, visitor attractions and other services depend on tourism spending to remain viable, and their income will inevitably suffer as a result of the budget decision,” he explains.

“We believe the Government should urgently rethink this measure which clearly fails to take into account the economic fall-out it would have in rural areas. There is a six-week consultation period following the budget before the changes are finalised, and we will be using this period to lobby strongly for a different approach.”

Members of his association, he adds, understand fully the need for the Treasury to “balance the books” at a time of economic crisis for the country.

However he argues that the decision to impose VAT on static caravans at the full rate in one go will be counter-productive if it reduces consumer spending and leads to job losses.

He says many of the jobs in tourism and its related businesses are held by younger people who would be in the front-line of any losses.

When VAT was introduced in 1973, Mr Wild explains, it was decided to exempt static caravans from the tax, with the exception of their removable fittings. The Government’s reasoning, he says, was that buyers of second bricks-and-mortar homes did not have to pay VAT, and its imposition on holiday caravans would be unfair.

“Following this present line of thought, perhaps the Chancellor will be considering imposing VAT on cottages bought as second homes in Cumbria?” says Mr Wild.

“It should also be remembered that static caravans bought on parks do not deplete local housing stock, or create extra demand which inflates house prices.”

Mr Wild and other park owners in Cumbria have raised their concerns with Westmorland and Lonsdale MP Tim Farron.

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