- Issue: Abbeyford Caravan Company (Scotland) Ltd disputed the VAT accounted for on removable contents of caravans. While caravans can be zero or reduced rated, removable contents are standard rated.
- Methodology: The taxpayer performed a detailed sampling and valuation, finding that the actual percentage for removable contents was between 5% and 9%, compared to the 16% to 27% implied by the cost ratio method used previously.
- Background: The cost ratio method incorrectly assumed equal value increase for the caravan and removable contents, and manufacturers attributed costs to contents not considered removable by case law.
- FTT’s Decision: The FTT noted that the new method provided a fairer and more accurate figure. It referenced K E Entertainments Ltd and HMRC’s internal guidance, emphasizing that only one method should be used to ensure fairness and equality.
- Outcome: The FTT ruled in favor of the taxpayer, allowing the appeal and noting that the reduction in VAT from £296,906.85 to £150,458.45 was substantial and justified the retrospective application of the new method.
Source KPMG
