Introduction: Why Holiday Park Investment Needs Two Tax Models
Holiday park investment has become one of the most heavily marketed property plays in Britain. Brochures promise fixed returns of eight per cent or more, with free weeks for the owner. Meanwhile, wealthier buyers acquire whole parks. However, almost every published guide is written by a seller, and almost none mentions tax beyond a line or two.
You face a harder problem, because you file two returns. As a US citizen or green card holder, you report the same lodge to HMRC and to the IRS. Moreover, the two systems disagree on what you own, how fast it wears out and when the tax falls due. Britain sees a chattel on a licensed pitch. America, in contrast, sees depreciable property used outside the United States, with its own rules on short stays and personal use.
This guide explains how both countries tax a holiday park investment in 2026. It covers the purchase taxes, the income rules, the US passive activity tests and the reporting forms. A full case study follows. At TaxYork, we prepare US and UK returns for wealthy Americans with British property and businesses.
What You Actually Own on a British Holiday Park
The Three Routes Into Holiday Park Investment
Holiday park investment reaches private buyers through three routes, and each one produces a different tax answer. The first is the sale and leaseback. You buy a lodge or static caravan from the park, and the park leases it back for a fixed term at a stated return. The second is the lodge you sublet yourself, usually through the park's letting desk.
The third route is ownership of the park itself. Here you buy the land, the site licence and the business, normally through a UK limited company. Importantly, the first two routes give you an asset that falls in value. Only the third gives you the land.
A Chattel on a Pitch Licence, Not Land
Most buyers making a holiday park investment own less than they assume. A static caravan or movable lodge is tangible movable property, known in English law as a chattel. You own the unit. The park owns the ground beneath it and grants you a licence to keep the unit on a pitch for a fixed term. When that term ends, the unit must usually leave the pitch.
This legal form drives every later tax point in a holiday park investment. A licence is not a lease, so you hold no estate in land. Furthermore, the park sets the annual pitch fee, the rules on subletting and often the commission due on resale. Industry research puts typical pitch fees between roughly £3,500 and £9,000 a year.
Depreciation: The Asset Is Designed to Wear Out
A lodge is not a cottage. A house tends to hold value because the land beneath it is scarce. A lodge, in contrast, is a manufactured unit with a limited life on a pitch you do not own. Consequently, a holiday park investment made through a lodge is an income play with a shrinking capital base. Moreover, each country treats that fall in value differently.
What the Regulator Says About Lodge Schemes
The UK regulator has now spoken directly on this sector. In December 2025, the Financial Conduct Authority published a statement telling consumers to beware of unregulated holiday park investment schemes. It reported a growing number of lodge schemes promoted by firms it has not authorised. It called them high risk, and it said some may be scams.
The statement adds that some arrangements may be unregulated collective investment schemes. Investors in those schemes are unlikely to reach the Financial Ombudsman Service or the Financial Services Compensation Scheme. Several lodge operators have also failed and left buyers with unpaid income. Therefore, treat any fixed return on a holiday park investment as an unsecured promise from one company.
UK Purchase Taxes: Stamp Duty and VAT
Why the Lodge Itself Usually Escapes Stamp Duty
Stamp duty land tax applies to land transactions, and the lodge in a typical holiday park investment is not land. Moreover, section 48 of the Finance Act 2003 lists a licence to use or occupy land as an exempt interest. As a result, a lodge on a pitch licence normally carries no stamp duty land tax in England. Scotland and Wales run their own land taxes, so check those separately.
However, two exceptions exist. First, some developments sell a long lease of the plot rather than a licence. A lease is a chargeable interest, so tax can arise on the premium. Second, a lodge built as a permanent structure on foundations may be part of the land. In both cases, the title documents decide the answer, not the brochure.
VAT on the Lodge: Zero, Five or Twenty Per Cent
VAT on a caravan depends on its size and build standard. HMRC sets out the rules in VAT Notice 701/20 on caravans. A unit that exceeds neither seven metres in length nor 2.55 metres in width is standard rated at 20 per cent. A larger unit is reduced rated at five per cent. A larger unit built to the residential standard BS 3632 is zero rated.
Most holiday lodges exceed the size limits, so the shell normally carries five per cent or nil. However, removable contents such as free-standing furniture, carpets and appliances are standard rated. Additionally, a new building sold as holiday accommodation, where you cannot live all year, is standard rated under VAT Notice 709/3. A private buyer cannot recover any of this VAT, so it forms part of the cost of the holiday park investment.
VAT on Your Lettings and the Trap for US Residents
Holiday accommodation is a standard-rated supply. For an owner established in Britain, this matters only above the registration threshold of £90,000 of taxable turnover. A single lodge rarely reaches it.
Americans who live in the United States face a different rule. HMRC's VAT Notice 700/1 confirms that the threshold is not available to a person with no UK establishment. Such a person must register on making any taxable supply here. Whether a lodge run by a British agent gives you an establishment depends on the facts. Therefore, a US-resident buyer should settle the VAT position of a holiday park investment before the first booking.
UK Income Tax on a Lodge After April 2025
The Furnished Holiday Lettings Regime Has Gone
Older holiday park investment brochures still quote reliefs that no longer exist. The furnished holiday lettings regime ended in April 2025. Consequently, a lodge let to holidaymakers now sits in an ordinary UK property business unless the activity amounts to a trade. Our guide to the abolition of furnished holiday lettings for US owners covers the change in full, so we do not repeat it here.
Why Caravan Income Is Property Income
A caravan is a chattel, yet the income is taxed as if it came from land. Section 266 of the Income Tax (Trading and Other Income) Act 2005 treats a right to use a caravan at only one location as a right deriving from an interest in land. Rent from a lodge-based holiday park investment is therefore property income. The same result generally follows where the operator pays you under a leaseback.
The rates are rising. For 2026-27, an individual pays 20, 40 or 45 per cent on property profits. From 6 April 2027, separate property rates of 22, 42 and 47 per cent apply. A holiday park investment held personally will therefore bear up to 47 per cent in Britain from that date.
Capital Allowances: Is the Caravan Still Plant?
Capital allowances on a lodge are less certain than sellers suggest. HMRC's Capital Allowances Manual at CA22100 accepts that a caravan provided mainly for holiday lettings on a holiday caravan site is plant, whether it is moved or not. The definition extends to movable wooden lodges on a licensed holiday site. It excludes immovable structures and residential sites.
However, a second rule now matters. Section 35 of the Capital Allowances Act 2001 denies allowances in a property business for plant provided for use in a dwelling-house. Before April 2025, the holiday lettings regime switched that bar off. HMRC's manual does not say how the bar applies to a holiday caravan today. A claim for the unit itself is arguable, because a caravan is not a building. Nevertheless, you should confirm the position before any holiday park investment is priced on the relief.
Where a claim is available, the annual investment allowance gives a full deduction on up to £1 million a year. Any balance enters a pool written down at 14 per cent a year from April 2026.
Selling the Lodge: No Gain, But No Loss Either
Capital gains tax rarely helps a lodge owner. A movable lodge with a predictable life under fifty years is a wasting chattel. Section 45 of the Taxation of Chargeable Gains Act 1992 exempts gains on such assets. The exemption cuts both ways, because a loss on an exempt asset is not allowable. The exemption can fall away where capital allowances are in point. In practice, most private owners sell at a loss and Britain gives them nothing for it.
If You Live in the United States
Non-resident owners meet withholding. Under the Non-resident Landlord Scheme, a letting agent or tenant must deduct basic rate tax from rent paid to a landlord who lives abroad, unless HMRC approves gross payment. You still file a UK return, and the United States taxes the same income with a credit. A US-resident holiday park investment therefore needs both returns from year one.
How the IRS Taxes a Lodge You Own Directly
The Seven-Day and Thirty-Day Tests
American passive activity rules for a holiday park investment turn on the length of each stay. Under Treasury Regulation 1.469-1T, an activity is not a rental activity if the average period of customer use is seven days or less. The same applies where the average is thirty days or less and you provide significant personal services.
A lodge let by the week or the weekend usually falls under the seven-day line. It is then treated as a business rather than a rental. However, the activity is still passive unless you materially participate. An owner who relies on the park's letting desk rarely does. Furthermore, the $25,000 allowance for rental real estate losses cannot apply, because the activity is not a rental. That allowance also phases out between $100,000 and $150,000 of modified adjusted gross income.
A leaseback reverses the answer. The operator is your only customer, and it uses the lodge for years. The activity is therefore a rental and passive by definition. Either way, losses from a holiday park investment are normally suspended until you have passive income or sell. Our guide to the passive activity loss rules for UK rental property explains how suspended losses are released.
Schedule E, Schedule C or Schedule 1
The reporting form for a holiday park investment depends on what you provide. The IRS explains in Tax Topic 414 that real estate rentals generally go on Schedule E. You move to Schedule C if you provide substantial services primarily for the guest's convenience. Cleaning between stays is not usually enough, although daily servicing may be. Moreover, a movable lodge may be personal property rather than real estate. Rental of personal property goes on Schedule C if it is a business and on Schedule 1 if it is not.
Depreciation Under the Alternative System
US depreciation on a holiday park investment follows the slower timetable. Section 168 requires the alternative depreciation system for tangible property used predominantly outside the United States. Bonus depreciation is not available for such property.
A movable lodge is arguably personal property with no class life, which runs over 12 years on a straight line. A lodge that is a permanent structure is real property. Residential rental property runs over 30 years, but the definition excludes units let on a transient basis. A permanent lodge let by the week is therefore likely to be non-residential real property over 40 years. IRS Publication 527 sets out the general framework. Because the classification can triple your annual deduction, it needs a documented position.
Personal Use and Section 280A
Free owner weeks carry a tax cost. Section 280A defines a dwelling unit to include a mobile home or similar property, so a lodge is covered. You are treated as using the unit as a residence if your personal days exceed the greater of 14 days or ten per cent of the days let at a fair rent. Deductions are then capped at the rental income, and no loss is allowed.
Even below that line, you must allocate shared costs between rental days and personal days. In contrast, if you let the unit for fewer than 15 days in a year, the rent is not taxed and the costs are not deducted. Consequently, a leaseback that grants you "four free weeks" can break the US deductions on a holiday park investment without anyone noticing.
Net Investment Income Tax
The 3.8 per cent net investment income tax applies to rents and to income from a passive business. It bites above $200,000 of modified adjusted gross income for a single filer and $250,000 for a joint return. Importantly, no foreign tax credit reduces it. A profitable holiday park investment therefore carries a US charge even where British tax far exceeds the regular US tax.
The Foreign Tax Credit: Baskets and Timing
Which Basket the Income Falls Into
You claim relief for UK income tax on a holiday park investment using Form 1116. Rent normally falls in the passive category. However, income that bears foreign tax above the top US rate is treated as high-taxed and moves to the general category. A British additional rate taxpayer at 45 or 47 per cent will usually trigger that rule. Excess credits shelter only income of the same category. They carry back one year and forward ten.
When the UK Tax Counts
Timing causes more lost credits than rates do. The UK tax year runs to 5 April, while your US return follows the calendar year. Most individuals claim credits when they pay, and UK tax on 2026-27 lettings falls due in January 2028, apart from any payments on account. As a result, the first US year of a holiday park investment can show income with no matching credit.
The one-year carryback usually repairs the gap, but it requires an amended return. Alternatively, you may elect to claim credits on the accrual basis, which is binding for later years. Our tax treaty and foreign tax credit service models both methods before the first filing. VAT and business rates earn no credit, because they are not income taxes.
Owning the Whole Park Through a UK Company
A Trade in Britain: Corporation Tax, Rates and VAT
Park ownership is the largest form of holiday park investment, and it is a trade, not a letting. A UK company pays corporation tax at the published rates of 25 per cent on profits above £250,000 and 19 per cent up to £50,000, with marginal relief between. The land is bought at non-residential stamp duty rates of nil to £150,000, two per cent to £250,000 and five per cent above. Hire-fleet caravans are chattels, so a fair part of the price can fall outside the land charge.
Business rates fall on the operator. The official rating manual for caravan sites treats the operator as the rateable occupier of the site, including privately owned static caravans. Hire-fleet caravans on a licensed holiday site qualify as plant. Additionally, a 40 per cent first-year allowance has applied to qualifying new plant since 1 January 2026.
How the IRS Sees the Park Company
A UK company that Americans control is a controlled foreign corporation. You file Form 5471 each year, and the company's profit is recomputed on US principles. Trading profit falls into net CFC tested income, reported on Form 8992. From 2026, a corporate shareholder receives a 40 per cent deduction, which gives a 12.6 per cent effective rate. An individual receives neither the deduction nor a credit by default.
Two elections solve this for a holiday park investment held in a company. The high-tax exclusion removes the income where the UK effective rate exceeds 18.9 per cent of US-measured income. Alternatively, a section 962 election taxes you as a US corporation, with the deduction and a credit for 90 per cent of the UK tax. However, generous UK allowances on a new hire fleet can pull the UK effective rate under 18.9 per cent. We explain that trap in our guide to care home investment for American owners, and the same logic applies here.
Two further points arise. First, holiday letting income is rent, and rent can be subpart F income under section 954 unless the company earns it through active management by its own staff. A staffed park often meets that test. Second, a private UK limited company is not a per se corporation under Treasury Regulation 301.7701-2. You may therefore elect to treat it as transparent, which makes UK corporation tax directly creditable.
Exit: Business Asset Disposal Relief Against US Tax
The sale of a company-held holiday park investment can qualify for Business Asset Disposal Relief. You need at least five per cent of the shares and a role as officer or employee for two years. The rate is 18 per cent from 6 April 2026 on a lifetime limit of £1 million of gains. Gains above that limit pay 24 per cent. The United States charges up to 20 per cent on the same gain, with a credit for the UK tax. Passive owners also pay the 3.8 per cent surtax.
Pooled Schemes, Reporting and Missed Filings
Fractional and Pooled Schemes: The PFIC Risk
Some schemes sell a share of a lodge or a park rather than a whole unit. If your interest is a share in a non-US company or fund that earns mainly rent, it may be a passive foreign investment company. You then file Form 8621 for each holding. Without a timely election, gains meet the top ordinary rate plus an interest charge. A loan note, in contrast, produces interest rather than rent. The US label on a holiday park investment therefore follows the legal instrument, not the photograph in the brochure. Our guide to student accommodation investment shows the same pattern in room schemes.
FBAR and Form 8938
A holiday park investment made by buying a lodge directly is not a financial account, so it does not appear on the FBAR. The British bank account that collects the rent does, once your combined foreign balances pass $10,000. The IRS confirms in its comparison of Form 8938 and FBAR requirements that directly held foreign real estate is not reportable on Form 8938. Shares in a UK park company are reportable, unless Form 5471 already covers them. Our FBAR and FATCA reporting service covers both forms.
Missed US Tax Returns on Lodge Income
Missed reporting is common in holiday park investment cases. Many owners declare lodge income to HMRC and never mention it to the IRS. If that describes you, act before a notice arrives. Where the failure was non-wilful, the IRS Streamlined Filing procedures may let you file three years of returns and six years of FBARs. Preparing those missed US tax returns also sets your depreciation record, which you will need on sale.
Case Study: A Lakeside Lodge in Cornwall
The Purchase
Consider Hannah, an American managing director who lives in London and pays UK tax at the additional rate. In April 2026, she buys a new movable lodge on a licensed holiday park for £260,000, including VAT. She holds a twenty-year pitch licence and pays no stamp duty land tax. She lets the lodge through the park's letting desk. This illustrative holiday park investment shows how one asset moves through both returns. The figures stay in sterling and treat the two tax years as aligned for clarity.
Year One in Britain
Guests book 190 nights, with an average stay of four nights, and Hannah's family uses the lodge for ten nights. Bookings total £44,000. Commission and cleaning cost £11,000. Shared costs, including the pitch fee, insurance, utilities and repairs, come to £12,000. Because 190 of 200 days of use were let, 95 per cent of the shared costs are deductible, which is £11,400. Her UK profit is therefore £21,600. Her preparer makes no capital allowance claim while the position is uncertain. Income tax at 45 per cent is £9,720.
Year One in America
The average stay is under seven days, so this holiday park investment is not a rental activity. It remains passive, because Hannah does not materially participate. Her ten personal days are within the limit of 19, so section 280A does not cap her deductions. Her preparer treats the lodge as personal property with a 12-year life. A full year of depreciation is £21,667. The half-year convention allows £10,833 in year one, and the 95 per cent business share is £10,292.
US taxable income is therefore £11,308. Tax at 37 per cent is £4,184, and the UK tax of £9,720 covers it in full. The excess credit of £5,536 carries forward. However, the 3.8 per cent surtax adds £430 with no credit. Her total tax for the year is £10,150, which is 47 per cent of her UK profit.
If the Capital Allowance Claim Stands
Suppose her preparer later confirms that the lodge qualifies as plant. A claim on the business share of £247,000 would remove UK tax for roughly eleven years. Hannah would then pay £4,184 of US tax and £430 of surtax in year one, with no UK tax to credit. The claim still saves money overall, since £4,614 is less than £10,150. Nevertheless, it converts a UK liability into a US one.
The Sale
Hannah sells in early 2034 for £120,000. She has lost £140,000 in real terms. Britain gives no relief, because the lodge is a wasting chattel on which she claimed no allowances. America reaches a stranger result. Depreciation over eight years totals £173,333, of which the business share is £164,667. Her adjusted basis in that share is £82,333, against proceeds of £114,000.
She therefore reports a US gain of £31,667 on an asset that lost more than half its value. Depreciation recapture taxes that gain as ordinary income, which costs up to £11,717. Britain charges nothing, so no new credit arises. Her carried-forward credits may shelter part of the charge, depending on basket and sourcing. A holiday park investment can therefore produce US tax on a real loss.
How TaxYork Can Help
Both Returns Prepared From One Set of Facts
TaxYork prepares your US and UK returns side by side. The same bookings, costs and personal days therefore appear consistently in both. Furthermore, we compute the average stay, the personal day count, the depreciation and the credits each year. For any holiday park investment, that discipline prevents an uncredited American charge.
Pre-Purchase Review and Overdue Filings
We also review each holiday park investment before you commit. Specifically, we examine the licence, the leaseback terms, the VAT split and the personal use rights. Where earlier years were missed, we prepare the overdue returns and FBARs as one coordinated filing. Our clients include investment bankers, company owners and investors. We provide comprehensive tax preparation and compliance across both systems.
Conclusion
Holiday park investment looks simple in a brochure and complicated on two tax returns. The lodge is a chattel on a licence, so stamp duty rarely applies. However, VAT is built into the price, the old holiday lettings reliefs have gone and UK rates reach 47 per cent from April 2027. On the American side, short stays change the passive activity label, and depreciation can create a taxable gain on a real loss.
Therefore, settle the facts before you buy. Above all, compute the result under both systems every year. A planned holiday park investment keeps its income and its credits. An unplanned one leaves tax in both countries and relief in neither.
Contact Us
If you own or plan to make a holiday park investment in Britain, speak to our team before you sign or before your next filing deadline. You can book a consultation with a US-UK specialist, email hello@taxyork.com or call 020 3488 8606. We will review your agreement and your existing returns. We will then tell you exactly what each country expects.
Disclaimer
This article provides general information only and does not constitute tax, legal or financial advice. Tax rules in the United States and the United Kingdom change frequently, and their application depends on your individual circumstances. The case study is illustrative and simplified. You should obtain professional guidance tailored to your situation before acting on any matter discussed here. TaxYork accepts no liability for actions taken in reliance on this article.