Withdrawal of VAT relief on approved alterations to Listed Buildings: briefing

The Heritage Alliance calls for a complete reversal of the Budget measure removing the zero VAT rating on approved alterations to listed buildings.

The Heritage Alliance will be briefing MPs fully when the secondary legislation introducing these changes to VAT is laid before the House later in the summer. But there may be Parliamentary opportunities this week for MPs to raise the widespread concern in the heritage sector on the Budget measure to withdraw the current zero rate of VAT on approved alterations to listed buildings.

1. The current position

VAT is charged at 20 per cent on repairs and maintenance to our building stock but at 0 per cent on new build

VAT is charged at 0 per cent on approved alterations to listed buildings, i.e. approved under Listed Building Consent.

2. The Budget proposal

Due to come into force on 1 October 2012, this measure would add 20 per cent to the cost of alterations approved under listed building consent

This will affect listed buildings used for charitable purposes such as places of worship, village halls, community spaces, etc as well as listed residential dwellings, and may make the difference between them having a viable future or disappearing forever.

The withdrawal of zero rating for alterations to listed buildings penalises desirable and sympathetic alterations. The heritage movement has campaigned for decades to remove the higher rate of VAT for repairs and maintenance, as the positive way to incentivise such work.

3. Our Concerns 


The withdrawal of this VAT concession will act as a sharp disincentive to just the sort of sympathetic adaptation of historic buildings that is so often necessary to secure a viable use for these buildings for the future.

As direct public funding for heritage declines, it is all the more important for Government to promote – not remove – any leverage that encourages the charitable and private

sector to take on responsibility for our heritage. This measure will have severe consequences for our listed buildings where the financial viability is often marginal

This change could have a devastating impact on the future of listed community buildings, village halls, community spaces and places of worship across the UK, as it raises significantly the fundraising targets for communities working to give them a new lease of life for the 21st century, through alterations such as adding toilet facilities, disabled access or kitchenettes. This is in effect a tax on disability and community use. Where heritage buildings are the catalyst for wider regeneration, the adverse effects will be felt even more widely.

Sustainable development
1.This measure appears in the Red Book 2.179 under the headingVAT: addressing borderline anomalies

 This proposal runs counter to the Government’s policies on re-use of materials to minimise greenhouse gas emissions. There is much evidence that re-using existing buildings is much more positive for the environment than new construction, but instead of putting right an anomaly this measure exacerbates the differential

Making the best use of existing resources avoids the loss of embodied energy, prevents landfill associated with demolition and waste and avoids the high levels of carbon emissions and energy involved in new development.

Economic context

Our listed buildings (some 400,000 in England) are the heart of our outstanding national heritage, the backbone of our tourism industry and essential to many working in the creative industries – two of the sectors acknowledged by Government to be fastest-growing. Our heritage is one of the drivers for economic recovery, not a brake on it2

We believe the withdrawal will have a hugely negative effect on our heritage. HMRC says the consultation is intended to ‘address some of the loopholes and anomalies in our VAT system’, but this is a rare fiscal incentive to help our historic environment earn its own keep. This anomaly remains firmly in place, creating a disincentive to invest in historic buildings and promote sustainable development

Distinctive historic buildings are often the centrepiece of regeneration schemes, which generate income for HMRC in different forms

The measure threatens to undermine the positive initiatives in the Penfold Review and the newly published National Planning Policy Framework to encourage the economic use of historic buildings and to realise the potential of these buildings to support economic growth.

The Heritage Alliance calls for this Budget measure to be withdrawn.

There should be no special exemptions – the zero rate for approved alterations to listed buildings should be retained for all listed buildings, regardless of building type or ownership.

For further information contact:

Kate Pugh,
Chief Executive,
The Heritage Alliance.

020 7233 0800


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