London’s St Bride’s is fundraising for restoration, but will the VAT changes hit it?Source: Photo: Daniel Shearling
Yes, says Kate Pugh, it will discourage owners from necessary work; but Sarah Gibbs claims the measure is a much-needed correction on the tax system
Chief executive, Heritage Alliance
This heritage tax would be a sharp disincentive to the sort of sympathetic adaptation often necessary to give listed buildings a viable future. It undermines the positive initiatives in the Penfold Review and the National Planning Policy Framework.
The consequences will be felt by charities, community groups, the smaller building preservation trusts and other owners who are not registered for VAT. As government funding for heritage dries up, it is more important to promote — not remove — levers that encourage the charitable and private sectors to take responsibility for our heritage.
Places of worship will suffer badly, but the offer of £5 million to the already overstretched Listed Places of Worship Grant scheme is a short-term sticking plaster. Grant schemes may be better targeted, but they can be easily cut or abolished. This rare VAT concession allowed under EU rules, covers a wider range of building types and owners. Once gone, it can never be replaced.
The government claims this arrangement encourages unnecessary (yet approved) alterations over repairs, but if VAT avoidance leads to unauthorised works and an increase in the black economy, our listed buildings are even more at risk.
VAT is a running sore for the heritage movement. The real perverse incentive is the 0% rate on new build and 20% on repairs and maintenance. This budget measure fails to address the bigger issues. Instead, it perpetuates the disincentive to invest in historic buildings and promote sustainable development.
Spokeswoman, HM Treasury
Over time significant anomalies have developed in the VAT system, causing very similar products to be taxed very differently. The government is taking steps to correct these anomalies, including aligning the alterations of listed buildings with the existing VAT treatment of repairs.
Building work is currently zero-rated if it is an approved alteration to a “protected building”, but standard-rated if it is an alteration to any other building or if it is for maintenance or improvement. This means that repairing the roof of a listed dwelling is standard-rated while adding an extension to a listed dwelling or installing an indoor swimming pool is zero-rated.
The policy change would abolish the borderline between alterations and repairs and maintenance, and between alterations to the building and alterations to the land surrounding the building. It will remove a major source of confusion, which results in a high volume of taxpayer queries, and frequent errors, as well as taking up a disproportionate amount of HMRC resources.
The government has extended the scope of the current Listed Places of Worship Grant Scheme. Currently listed places of worship of any faith or denomination can claim a grant equal to the VAT paid on eligible repairs and maintenance works. The scheme will be extended to include approved alterations to listed places of worship. DCMS will add £5 million a year to the scheme’s budget.
It is not right that a church already pays VAT on repairs, but a millionaire can install a swimming pool in his listed mansion, VAT free. This simply corrects this anomaly in the VAT system.
17 August 2012
8 May 2012 | Updated: 13 December 2012 11:59 am
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