As part of the Budget announcements, HMRC has opened a consultation on its proposal to eliminate key current VAT relief for heritage work linked to Listed Building Consent (LBC), from October 2012, with the consultation to close on 4 May.
Entitled ‘VAT: addressing borderline anomalies’, HMRC says the consultation is intended to ‘address some of the loopholes and anomalies in our VAT system….For example, at present, soft drinks and sports drinks are charged VAT; sports nutrition drinks are not.’
HMRC justifies its examination of the proposals as it considers that ‘the majority of the work covered by the relief consists of extension work which is not necessary for heritage purposes’, and that this generates ‘a perverse incentive for change as opposed to repair’.
IHBC Chair Jo Evans said: ‘In the absence of wider sector involvement in these proposals, they represent a missed opportunity to rationalise VAT in ways that would benefit jobs, the environment and the economy by encouraging building care, maintenance and improvement.’
‘Instead the proposals will use the VAT regime to penalise further low-carbon, high-skilled maintenance and regeneration opportunities – often community-based when they involve the heritage sector – in favour of high-carbon alternatives already readily funded through more mainstream industries that focus on demolition, disposal and new-build.’
Mike Brown, IHBC Policy Committee Chair, in initial comments on the proposals, said: ‘There is an obvious impact on the viability of projects generally from these proposals. They would reduce the value of sites and may have an impact on those on Council disposal lists – which would be very difficult in the current climate). Further, this may place an additional burden of leadership and staff resourcing on public-private-3rd sector partnership projects. For example local authorities don’t pay VAT, so may have to lead on projects with marginal viability.’
Nathan Blanchard, IHBC Trustee and Wales Branch representative said: ‘We should be looking for a new relationship between VAT, the historic environment and public benefit. Works to those buildings with the greatest need and access to the public could create justification for a move away from simply rewarding or penalising ownership of the heritage.’
‘An alternative would be to seek a reduction in VAT to either 5 or 0%, which could be the difference between a viable or unviable scheme. This would largely accord with an existing VAT Notice 708 (2008), referring to Buildings & Construction where similar provisions are made for domestic / residential properties being brought back in to use after a number of years standing empty. The current Notice tends to favour urban environments and particular uses where urban regeneration measures operate, while much of the nation’s historic buildings at risk are located in peripheral or rural environments where grant assistance is less readily available. Perhaps we should seek to extend this scheme to any historic building standing empty for an agreed number of years, thereby meeting the regenerative test.’
Fiona Newton, IHBC projects officer, said: ‘The worst-hit cases most probably will be buildings at risk projects where so much work is necessary that LBC is required. If they were able to propose this, why at the same time could they not propose exempting VAT on repair instead. A system of no VAT where LBC is not required would always have seemed a more logical one, benefiting those who repair rather than completely revamp.’
The sector press voice, civilsociety, has reported on how charities could be hit by VAT change on listed buildings, noting that ‘Charities that occupy listed buildings and were planning to make improvements to them will find they now have to pay VAT on the works….’.
Heritage Alliance says: ‘The Heritage Alliance is concerned this drastic change could have a devastating impact on the future of listed buildings across the country, as it presses yet more costs on communities working to give them a new lease of life – such as through adding toilet facilities or disabled access.’
English Heritage said: ‘Whilst English Heritage notes that the removal of VAT relief on approved alterations to listed buildings will eliminate a perverse incentive to carry out more changes to a listed building than are necessary, we recognise there is also a potential negative impact on private owners, charities and places of worship. We are currently seeking clarity on a number of detailed issues with HMRC in order to make a full assessment of the impact of the proposed changes.’
Dave Brown, the Listed Property Owners Club (LPOC) VAT adviser said: ‘The majority of projects that I get involved with are simply restoration jobs – and with VAT at 20% being payable on these works in future, home owners are likely to ‘make do and mend’ – or else purchase non-listed buildings next time. The end result, unfortunately, is that many historic buildings will simply fall into a state of disrepair. Listed property owners have a hard enough time looking after the often fragile state of their homes that any disincentive introduced will, in the long-term, damage the heritage of the United Kingdom.’
See IHBC Consultations at: LINK
Civil Society News: LINK
LPOC News: LINK
EH Response: LINK
See also online discussions in IHBC’s Linkedin Group at: LINK
Follow the discussion on Twitter at #LBVAT
Further details: http://www.hm-treasury.gov.uk/budget.htm
See the Cut the VAT campaign at: http://www.cutthevat.co.uk/
See the consultation document at: LINK
HMRC Budget 2012: LINK
