So what Govt Covid support has been provided to your park?

 

How do you work out a realistic refund claim figure?

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Here we use the real analysis of the figures based on a real park somewhere in the country. The name and locations have been changed.

 

Angel of The North Caravan Park Site Fees Breakdown

 

The first thing to say is that this is an unprecedented situation, never before has the government ordered a number of sectors of our economy to close.

 

Without going into detail of all of the legal issues (that would be a separate document) this is a complex situation, which in legal terms is untested. There are currently small claims court proceedings underway at this current time.

 

This document focuses upon outlining the financial aspects, what is the monetary value of the time period we could not use our caravans and what government incentives have the park owners received, and are able to claim themselves.

 

Therefore, we will be in a position to challenge a refusal of a refund or a low amount.

 

What does the period of time of the lockdown equate to in monetary terms?

 

In order to set the scene, we first need to establish, in monetary terms, what does the period of site closure equate.

 

Lockdown commenced on March 23; it was lifted on 4 July. This is a total of 102 lost days (including the day of the lockdown announcement).

 

Note: I have not applied the following calculation to include the rates, as this separate consideration is detailed later.

 

Site Fees amount - £2350

Plus, VAT (20%) - £470

Total = £2820

£2820 divided by 11 months = £256.36

 

We pay site fees for 364 days

 

Therefore, taking the site fees of £2350 divided by 364 days = £6.46 per day (excluding VAT)

£6.46 multiplied by 102 = £658.92

 

Note: The reason that VAT is not included is that this must be paid to HMRC

 

£658.92 therefore would be amount of site rent lost during lockdown from 23rd March to 4th July. This can only be refunded by the Shearer’s if they choose to do so.

 

The Rates or 'Rate-able Value'

 

The site fee invoice for year 2020/2021 includes an amount for Rates.

 

This will include what is called the 'Rate-able Value', it will also, (but not itemised), include as a minimum, the water rates, but there may be other elements that are included. We do not have a breakdown upon our 2020/2021 site fees invoice.

 

What is the Rateable Value for  Angel of The North Caravan Park?

 

Cumbersome City Council has stated that the rate-able value of Angel of The North Caravan Park (2020/2021) is £37,000

 

The calculation to determine the amount the park pays to Cumbersome City Council is £37,000 X 0.512p = £18,994

 

The number of caravans on Angel of The North Caravan Park is 157 (a quick count shows that this could be 163)

 

Therefore, one would assume that the most appropriate way to proportion per caravan. Cumbersome City Council has stated that in fact the figure that was "invoiced" to Angel of The North was £18463. Therefore, this is the figure that will be used. £18,463 / 157 = £117.60 per caravan.

 

It is thought that a number of residents were on park during the period of the lockdown, (I’m informed this was 27 caravans). This was only permissible if the resident did not have a 2nd home in the UK. I do not know details of everyone’s circumstance but it’s possible that the government guidance has not been in all cases, and I know that for some people this is a matter of frustration and annoyance. Why were some allowed to remain on park whereas I could not. This document includes

 

Cumbersome City Council, they state that the park has not been required to pay any rate-able value at all. Their account balance is zero. This means that the park has not been required to pay anything to the council.

 

Note: Cumbersome City Council advise that no VAT is chargeable upon rates.

 

Other aspects of the Rates charge

 

One question for consideration is whether the rates fees includes any other elements for example water and sewerage charges. One would assume that it would. Circa £141.74 including VAT.

 

The Site fees invoice also includes VAT.

 

Note: From April 2017 – commercial / business premises were able to shop around for water / sewerage.

The view of Wave (the equivalent of Cumbersome City Water for businesses (is that VAT is payable in 9 out of 10 cases.

 

VAT CUT FOR THE LEISURE AND TOURISM SECTOR

 

The Chancellor on 8th July announced a temporary cut in the VAT rate to 5% for certain supplies in the leisure and tourism sector.

 

The aim of the change is to boost the economy and encourage consumer spending in the sector. However, it will undoubtedly cause some transitional headaches for businesses that have to change their VAT accounting.

 

The government announced, for the leisure & tourism sector, a Value Added Tax Reduction from 20% to 5%. This applied from 15th July 2020 to 12th January 2021 = 182 days.

 

Where payment or a deposit has been received before 15 July 2020 but the goods/services are supplied after the VAT rate change, you can choose to charge and account for VAT at 5% on goods removed or services performed on or after 15 July 2020 (but not after 12 January 2021) even though payment has been received or a VAT invoice issued before that date. This is a special provision allowed by HMRC.

 

It is important to note that it is the business's decision whether to amend the VAT rate on these prepayments that span the change. Depending on the contract you have with your customer, you may be required to pass on the VAT saving to your customers, however in most cases your prices will be shown as VAT inclusive and it will be your choice to pass on the saving or not. Note that if you choose to amend the rate and have already issued a VAT invoice showing the 20% rate of VAT, you must correct it by issuing a credit note and reissue using the 5% rate.

 

In the guidance it states it includes 'sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities'.

 

What does this mean for Angel of The North Caravan Park?

 

The assessment is that the VAT reduction does apply to pitch fees but whether or not the site passes on the VAT reduction is - unfortunately - entirely down to them.

 

They can, (many will), choose to simply charge the same gross fee as last year, albeit that will mean they will retain a higher net amount for themselves.

 

The residents of Angel of The North paid park fees in advance & of course as VAT was 20% at that time, that is what the site owners would have had to account for.

 

If the VAT hasn't yet been paid the VAT payment can be adjusted to 5%.

 

For example, if Angel of The North raised the VAT invoice on 01/11/2020, to be paid by 28/02/2021, the 5% rate will apply.

 

Questions:

 

If the VAT has not yet been paid, can an adjustment be made (i.e. a pro-rata calculation applied for the period July to Jan 21)?

 

One view heard expressed is that as the lower VAT rate commenced from July 2020, it would only apply to subsequent invoices thereafter, i.e. not for full year fees invoiced prior to that time and already paid. I think the only way a refund for this year might be due would be if your fees were actually due monthly, but an individual voluntarily chose to pay in advance. In that case there might be an argument that a refund is due, but even then, it's sketchy, as the site could simply say that they are retaining the difference, as permitted by HMRC.

 

Coronavirus Retail Hospitality and Leisure Grant Fund

 

There is one other government form of assistance that is available to Angel of The North caravan park. This is a government grant of up £25,000. This is largely determined by the rateable value. Note: Angel of The North and the other two parks in the Shearer Group are registered as limited companies therefore this grant can be claimed each park.

 

The following has been taken directly from Gov.uk

 

The Retail, Hospitality and Leisure Grant Fund (RHLGF) supports businesses in the retail, hospitality and leisure sectors with their business costs during coronavirus.

Businesses in England in the retail, hospitality and leisure sectors are entitled to a one-off cash grant of up to £25,000 from their local council.

 

What you get

 

If your business has a property with a Rateable value of £15,000 or under, you may be eligible for a grant of £10,000.

 

If your business has a property that has a Rateable value of over £15,000 but less than £51,000, you may be eligible for a grant of £25,000.

 

Eligibility

 

You're eligible if your business:

 

• is based in England

• is in the retail, hospitality or leisure sector

• had a Rateable value of under £51,000 on 11 March 2020

 

Changes made to a business's Rateable value or rating assessment after 11 March 2020 will not affect eligibility.

 

Properties covered by the fund

 

Properties eligible for the grant will be those that are wholly or mainly being used as a hospitality, retail, or leisure venue, such as a:

 

• shop

• restaurant, café, bar or pub

• cinema or live music venue

• estate agent or letting agency

• assembly or leisure property - for example, a bingo hall, a sports club, a gym or spa

• hospitality property - for example, a hotel, a guest house or self-catering accommodation

 

Properties excluded from the fund

 

You cannot get funding for:

 

• properties occupied for personal uses, such as private stables, beach huts and moorings

• car parks and parking spaces

 

If you use more than one property

 

Eligible businesses can get one grant per property.

 

You cannot claim both the retail, hospitality and leisure grant and the small business grant on the same property.

 

If you already get state aid

 

The retail, hospitality and leisure grant counts as state aid under the COVID-19 Temporary Framework.

Your local council will ask you to complete a declaration confirming that:

 

• you will not exceed the state aid temporary framework threshold of £800,000

• you were not an 'undertaking in difficulty' on 31 December 2019

 

So, what does mean, it certainly appears that Angel Of The North Caravan Park would be entitled to receive a government grant of £25K.

 

Research of other parks has revealed that a number of parks have indeed claimed £25K (in fact it can be paid automatically as it's based on rateable value / or if not, there is a claim date of this month.

 

Furloughed Employees

 

It would appear that a number of the employees on each park were placed upon the governments furlough scheme. Therefore, the park made significant savings in terms of employee wages. This is likely to be several thousands of pounds across the 3 parks in the group. Possible estimation is £10,000 based upon 2 employees at Angel of The North each earning £20K per annum.

 

Summary

 

Let's summarise and add this up.

 

Logic would suggest that the Rateable Value should be refunded + VAT.

 

£117.60 Rateable Value

£23.52 VAT

 

Total £141.12

 

You could argue an element of the water rates (assuming that the rates figure of £250 includes water rates)

 

Given the visual relatively little overheads, the question then his how much of the £658.92 could or should be refunded. How can we arrive at a reasonable figure? See Summary.

 

What could be argued?

 

What is the Estimated Minimum Angel of The North Caravan Park Can Claim From the Government as Covid 19 Relief?

 

£18463 - Cumbersome City Council (Rateable Value not paid)

£10,000 – Furlough salary for 2 employees (estimated)

£2,000 – Furlough retainer if the 2 employees are still in employment on 31st January 2021

£3,292 – VAT paid by residents on the Rateable Value (not paid to Cumbersome City Council). Based upon 140 occupied caravans (140 X £23.52)

£25,000 – Government business grant (subject to claim / award)

£24,715 – VAT reduction from 20% to 5% on the site fees (subject to claim). This would be £24,715 divided by 140 caravans = £176.54 per caravan.

 

Total = £83,470 – Income from Government relief

 

£329,000 (£2350 x 140 caravans) – Income from site rent (ex VAT) based upon 140 caravans being occupied from the total of 163 on park.

 

What is the estimated refund residents could expect from monies paid to date?

 

£117.60 - Rateable value (not paid to Cumbersome City Council)

£23.52 – VAT refund on rateable value

 

Total = £141.12

 

£176.54 - VAT refund potential on site rent (6-month period). 5% rather than 20%

 

Therefore:

 

£141.12 + £176.54 = £317.66

 

Therefore 140 caravans refunded £317.66 each = £44,472

 

£83,471 – Total Governmental relief

• £44,472 – Resident refund on rateable value (inc VAT)

 

Therefore £38,999 is the sum that Angel of The North Caravan Park received from government that could be divided by resident. Therefore £38,999 divided by 140 caravans = £278.57 per caravan for the loss of use between March – July period.

 

            £317.66

+          £278.57 For loss of use

            £596.23

 

Therefore, each caravan resident could receive close of £600 without the need for any monies needing to come from the site rent that residents have paid.

 

In addition to the above another way of residents being offered a monetary incentive would be there being no increase in next year’s pitch fees = This could equate to £125. Giving you a total figure of £725 overall.

 

Of course, all of the above is subject to scrutiny and challenge, but hopefully at least it provides helpful information not only to the residents of Angel of The North but also to the owners. It hopefully has opened up your understanding on the various aspects of what is a complex situation.

 

Other factors to be taken into consideration

 

Once of the key principles to what has occurred across the caravan industry is whether or not a park has had significant overheads / running costs to main during the period of the lockdown. For example, say a park had invested in a new swimming pool or new machinery, an owner could argue that the level of investment prevents a refund of park fees.

It could also be argued that due to the closure, this prevented the park from selling caravans i.e. reducing income.

 

Looking at Angel of The North it is not obvious to what extent this may, or may not, be applicable.

 

But remember that we as residents each paid £3150, multiply this by say 140 occupied caravans (out of 163). This equates to £441,000 (estimated).

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