Forthcoming Changes to VAT Liabilities
VAT charged on building work is a complicated area of taxation which needs special advice. However everyone connected with heritage interests opposes the Chancellor’s proposal to remove the VAT exclusion for approved alterations to historic buildings. It will affect all owners of Lutyens buildings. It will impact badly on the struggling construction sector generally and will discourage the rescue and reuse of historic buildings in future. Work on new construction is zero-rated for VAT and it is difficult to see any justification for not zero-rating repairs where a very high proportion of construction work is on the existing building stock. This is the government’s advice so far:
With effect from 1st October 2012, subject to proposed amendments to the legislation, there will be changes to the VAT liability of the following items:
Alterations to Listed Buildings
The zero-rate for approved alterations to listed buildings will be removed (VAT Act 1994, Schedule 8, Group 6). This will have a significant impact on those who live in listed dwellings, as well as communities with listed churches, or ancient or historical monuments.
This means that those who own or are responsible for protected buildings or monuments will incur VAT at the standard rate on all works of either approved alterations, or repair and maintenance, subject to transitional arrangement and antiforestalling legislation. In addition, the zero-rate for the first sale or long lease of a substantially reconstructed protected building will be restricted to cases where buildings are reconstructed from a shell.
Whilst the transitional arrangements provide a certain level of protection where contracts for approved alterations have been signed before 21 March 2012, the works must be completed before 21 March 2013. The anti-forestalling provisions limit the zero-rate, in all other cases, to works completed before 1 October 2012.
For those responsible for listed places of worship, the Listed Places of Worship Refund Scheme is to be extended, so that claims can be made for approved alterations which are subject to the standard rate of VAT as a result of this announcement.
Anthony Richardson AA Dip RIBA