VAT treatment of disconnection fees for utilities on caravan park

The taxpayer undertook activities at a leisure park including the sale of caravans used as year-round residential properties and the provision of sites for residential caravans the letting of caravans holiday lettings various sports facilities and operating a shop restaurant and bar.

After a VAT visit several issues arose on which the taxpayer and HMRC could not agree. The matter proceeded to the First-tier Tribunal where HMRC was successful on partial exemption calculations output tax apportionment on the supply of moveable furniture in new units evidence for claiming input tax and penalties. The remaining issue concerned fees charged by the taxpayer for disconnecting gas electricity water waste television and telephone at the end of a letting period for residential caravans and whether these should be exempt from VAT.

The original connection fee is considered by HMRC to be an incidental...