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Response from HMRC on VAT to Listed Buildings
Following our email to HMRC on the VAT consultation, as previously blogged, a response has been received outlining why a changed to incentivise repairs and maintenance cant be introduced and the new changes are currently proposed.
Thank you for your e-mail concerning the changes announced at Budget 2012 to VAT and approved alterations to listed buildings. Your specific enquiry has been passed to me to respond to. I apologise for the delay in replying and for any inconvenience this may have caused.
In my personal opinion you have made some valid points, particularly with switching the zero-rate on approved alterations to repair and maintenance however this is not possible for the following reason.
VAT is a broad-based tax on consumer expenditure and reliefs from it have always been strictly limited. When the UK joined the European Community in 1973, it meant signing up to the general agreements which covered the application of VAT throughout the EC. Under these and successive agreements, we are allowed to keep zero rates of VAT on items such as food, books and public transport fares most of which had been exempt from the old purchase tax which preceded VAT. However, these same agreements do not allow us to extend the scope of our existing zero rates or introduce any new ones. It would therefore not be possible for the UK to introduce a new zero rate for/remove VAT from repair and maintenance of listed buildings even if they were approved.
For information here are changes, as announced at Budget and detailed in our consultation document and how they would apply if incorporated into law unchanged.
The position regarding the changes announced at Budget is as follows:
Supplies of building materials or construction services supplied in the course of an approved alteration to a listed building made on or after 1 October 2012 will be subject to VAT at the standard VAT of 20%. Any approved alterations completed by 1 October 2012 can be wholly zero rated.
Under transitional relief, if a written contract was in place before Budget day (21 March 2012) the supplies of building materials and construction services under that contract can continue to be charged at the zero rate until 20 March 2013. Any work performed after that date will be standard rated.
Contracts entered into on or after March 21 2012, will have the level of work completed up to the 1st October 2012 charged at zero rate with the remainder after this point charged at the standard rate of 20%. A fair apportionment must be made of the work done before and after the change.
If a pre-payment is made or building materials delivered before 1st October 2012, but the construction services are performed (or the materials incorporated in the building) on or after this date, an anti-forestalling charge will apply at the standard rate of VAT which becomes due on 1 October 2012. For construction services the charge will apply to the proportion of such services performed on or after 1 October 2012. For goods, the charge will apply to the extent that they are incorporated into the building on or after 1 October 2012.
As for Listed Places of Worship, there is a Grant Scheme that also covers repairs and maintenance, see below for the current situation:
Following constructive discussions with the Church of England, on behalf of all faith groups, the Chancellor announced on 17 May that after the VAT change comes into effect, we will extend the scope of the Listed Places of Worship Grant scheme so that it covers alterations as well as repairs, and we will increase the funding for this scheme by £30m a year. We are confident that this will cover the additional costs borne by listed places of worship following the VAT change, and that the additional resources will enable 100 per cent compensation for repair and maintenance costs eligible under the current Listed Places of Worship Grant Scheme.
