But Treasury rejects calls for U-turn on controversial policy

Ministers have introduced a series of exemptions from the scrapping of VAT relief for listed buildings but have stopped short of the U-turn hoped for by campaigners.

Chancellor George Osborne announced in this year’s budget that alterations to listed buildings, previously exempt from VAT, would be subject to the tax from October 1 2012.

The move was slammed by heritage experts who warned that the cost of many projects would immediately jump by 20%.

Treasury officials have since confirmed that many projects will still qualify for tax relief or will be able to reclaim VAT from a grant scheme.

However, calls for the chancellor to scrap the policy completely from groups including the Heritage Alliance and the Historic Towns Forum have been rejected.

Transitional arrangements have been introduced to tackle criticism that projects already underway will be hit by increased costs.

The original plans specified that projects which were subject to a written agreement before the budget announcement would continue to qualify for VAT relief.

But advice from the Treasury now specifies that any project which had applied for listed building consent before the budget announcement will also qualify.

Additionally, the Listed Places of Worship Grant Scheme, which effectively refunds VAT paid on alterations to religious listed buildings, has been increased by £30 million a year.

Works such as decoration, changes to kitchens and bathrooms and security measures, which were previously exempt, will now be covered the scheme.