Historic Environment Scotland (HES) Director of Heritage Elizabeth McCrone has posted on LinkedIn to explain why HES commissioned research on VAT and what the findings were.
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…Around 20% of domestic buildings in Scotland (500,000) are traditionally built and date from before 1919…
Elizabeth McCrone writes:
Ever since I’ve been in the heritage sector the issue of VAT and listed buildings has been a hot topic. I’ve often wondered if it really is the answer to keeping our listed buildings looked after. There are over 45,000 listed buildings in Scotland and they are a hugely important part of our heritage and our story. They’re not just castles and country houses, but include tenements, schools, factories, bridges and a whole host of much-loved structures.
Most repair, renovation and improvement work to existing buildings is subject to 20% VAT, with certain exceptions. Work on new buildings is zero-rated for VAT. There is, therefore, a financial incentive to build new, rather than reuse existing buildings. Within the context of a climate emergency and a cost-of-living crisis, we commissioned Harlow Consulting to find out how much a rebate on works to listed buildings would cost, and how much the issue of VAT impacts on the maintenance and reuse of listed buildings. While Scottish Ministers support the removal of VAT on works to listed buildings, VAT is not a devolved matter, so we can’t change the way it is charged in Scotland. But we asked our consultants to consider whether other options such as a rebate scheme might work.
A Simple Solution?
A rebate scheme hasn’t been proposed before. We wanted to know whether one would be feasible and, more importantly, if it would be effective in encouraging the maintenance and regeneration of listed buildings. Would changes to the VAT system make a big difference to our ability to maintain and repair historic buildings and make them more energy efficient? Unsurprisingly, like VAT itself, it’s not that simple. And it perhaps raises more questions than answers. For example, a blanket VAT cut or rebate might benefit more well-off owners who already have funds available, but it might not support those most in need of help to look after their building. It’s not at all clear that a reduction in VAT would really make repair and maintenance affordable for those of limited means – and that’s before you consider that there might not be affordable and/or competitive skills or materials available in your area to carry out the work. A blanket refund of VAT costs would cover things like new kitchens and bathrooms that wouldn’t directly benefit the long-term sustainability of the building itself.
Another major issue is skills and materials. A VAT rebate scheme could stimulate a significant demand in the market for repairs and development schemes, but are there the skills and materials to undertake that increased work? For example, it can be hard if you live out of the central belt to find a joiner to repair traditional timber sash and case windows. Or to find traditional Scottish slate to repair your roof. We know there is a shortage of skills and materials. Without those in place, a VAT rebate scheme might not operate effectively because there wouldn’t be enough people to do the work. Or it could help to stimulate a revival. There’s a chicken and egg situation here.
Addressing the Underlying Issues
Within a cost-of-living crisis and a climate emergency, people are more likely to do the work they have to, such as meeting energy efficiency targets, rather than what they might like to do. We know about the issue of materials and skills. There is also knowledge. People need to feel informed and able to decide what is the right solution for them. There need to be trusted and cost-effective retrofit solutions which are sensitive to the character and performance of listed buildings, available across Scotland. The benefits of a VAT rebate scheme may be very limited unless key issues like materials and skills are addressed first. There could be unintended consequences; a stimulus in demand may result in inflation and no guarantee, in the current financial climate, that savings would be passed on to the consumer. There are options here around a more targeted VAT approach where support is means-tested and only available for works which support retrofit and/or are necessary to keep a building wind and watertight, thermally efficient and able to tolerate a changed climate. Listed buildings and indeed all traditional buildings are key to Scotland reaching Net Zero. As Carl Elefante, former president of the American Institute of Architects, said, ‘The greenest building is the one that already exists’. Around 20% of domestic buildings in Scotland (500,000) are traditionally built and date from before 1919. Around another 500,000 non-domestic buildings also date from this time.
The Case for Change
There is a strong case for change here – to preserve our traditional skills and the character of our cities, towns, villages and countryside, to stimulate the economy and to support the green agenda. In terms of how much a rebate scheme would cost, it wasn’t easy to try and do this calculation. The way we capture information about works to listed buildings and the value of that work isn’t something that can be found at the touch of a button. So, we have an educated guess, and that is around £47 million. We need to encourage maintenance and regeneration and make it not only affordable, but easy to find a skilled tradesperson to do it. We’ll be storing up bigger issues for the future if listed building owners are unable to fund basic maintenance at the moment and don’t have access to the materials and skills needed to do this.
So VAT might not be the only answer. Maybe a suite of approaches would help to ensure that our heritage remains in good repair for the future. Maybe we need a more targeted approach to ensure that money goes where it is needed. And if we want to show the benefits that focused funding could give to net zero, our economy and our heritage we need facts and options to make that case. You can read the report we commissioned on our website and I’d really like to hear what you think. Our colleagues at the Built Environment Forum Scotland will be hosting a stakeholder event to talk about the report and we’ll be joined by representatives from Harlow Consulting so they can tell you just how hard it is to try and answer what turned out to be the £47 million question! Please do sign up for the event on Tuesday 18 June and I look forward to seeing you there.
