Legislation and general red tape surrounding listed buildings can often be confusing and open to interpretation by an individual. The situation with Value Added Tax (VAT) charged by Her Majesty’s Revenue and Customs (HMRC) is just one of many such complications.
For reference, HMRC Notice 708 details VAT allocation in respect of Building and Construction work and, more specifically, Section 9 gives information regarding works to Listed Buildings.
In all normal circumstances standard rate VAT (currently 20%) is attributable when works are carried out on existing, un-protected buildings. Where works are carried out on Listed Buildings or Scheduled Monuments, however, there are situations when VAT may be zero-rated. Notice 708 sets out 6 conditions which must all be met in order that services can be zero-rated:
- The work is to be carried out to a ‘protected’ building.
a. That is to a listed building or scheduled ancient monument.
- The work is an ‘alteration’ of a protected building and is not work of ‘repair or maintenance’.
a. An ‘alteration’ includes a meaningful change to roofs, walls, floors, internal and external joinery etc
b. Works of ‘maintenance or repair’ could include re-slating a roof, repairing decayed windows or doors or re-pointing a wall. These do not qualify for zero-rating.
- The alteration is ‘approved’
a. That is, the alteration works require, and have obtained, listed building consent from the Local Authority.
- The services are made ‘in the course of the approved alteration’ of that building.
a. If works are carried out which in themselves do not require listed building consent, but are in connection with the approved works, such as preparation works, these may be zero-rated.
- Where necessary, a valid certificate of approval is held.
a. Where listed building consent is received retrospectively (ie. After the works have been carried out) the works would be standard rated.
- Services offered are not specifically excluded from zero-rating.
a. Surveyors, Architects and consultancy services, for example, are always standard rated and so excluded from VAT zero-rating.
Many owners of residential listed buildings and even building contractors are either unaware that VAT apportionment is any different than when working on non- protected buildings, or wrongly believe that all work to listed buildings is zero-rated.
Unfortunately, there are no benefits to owners, and specifically no VAT reductions, to undertake ‘repairs and maintenance’ of listed buildings. English Heritage, amongst others, has been campaigning for the VAT regulations to be amended to reflect the importance of repair and maintenance over alteration works to listed buildings. To date, such campaigning has been unsuccessful.
Owners of listed buildings have an obligation to keep their buildings in a good state of repair. If they do not, the Local Authority can step in and take action, including carrying out urgent works for the preservation of the listed building after serving notice on the owner. The associated costs incurred by the council may then be recovered from the owners. In extreme cases, the Local Authority can commence compulsory purchase order proceedings.
The VAT regulations can be complicated and if you are in any doubt you should seek further guidance. The HMRC run a VAT Helpline from 8.00am to 6.00pm Monday to Friday or, alternatively, it may be worth your while for more complex projects to employ the services of a professional VAT advisor.
For more information, the HMRC website provides a comprehensive online guide. Click here.
Editor’s comment: We are firmly of the opinion that VAT should be not charged on the preservation works to listed buildings and that any new alterations or changes – unless reflecting a council authorised improvement or restoration (such as a reinstatement of traditional windows) – should actually be subject to VAT at the appropriate rate.