Proposed VAT Changes to Approved Alterations to Listed Buildings

In the last Budget, the Chancellor proposed a change to legislation on the VAT zero rating that is currently available on approved alterations to listed buildings.  The changes proposed will effectively put alteration works (i.e. works to the fabric of buildings and extensions) in the same position as repairs and maintenance (which have always been subject to standard rate VAT).

HMRC consider that the current rules have encouraged property owners and developers to alter listed buildings rather than repair them.  They also believe that considerable time and resource has been spent by HMRC in considering clearance applications for building projects where there is a mix of alteration and repair, and that removing the zero rating provision altogether will make things simpler.

Impact on Building Preservation Trusts

This proposal will have a significant impact on Building Preservation Trusts, whose main aim is to preserve listed buildings and often these will ultimately be used by either charities, or for residential purpose, where any VAT charges on alteration will be a real additional cost to the project.  Although reduced rating (5%) can be available on all renovation works to residential properties that have been empty for 2 years or more, this condition may not always be satisfied when works need to commence and this does not extend to charitable use.  As such, the costs of projects could rise by 20% if this proposal goes through.

Consultation Process

We are aware that other organisations have contacted the Chancellor to rethink the proposal given the potential impact it will have on the sector and there is also a consultation underway for any interested party to make their feelings know on the changes.  The consultation period ends on 18th May 2012.

Chiene + Tait is acting on behalf of a number of clients to voice our concerns about the proposed changes.  If you would like to find out more about the proposed change, how to voice your concerns or have a VAT query, please download our alert on the right of this page or contact a member of our VAT Team on 0131 558 5800 or email