Charity VAT win

Charities involved in non-business activities should be able to use VAT saving schemes when renovating property, according to a new tribunal ruling.

The tribunal ruled that Whitechapel Art Gallery should be able to spread over 10 years the VAT cost of its £10m renovation project, at the former Whitechapel library above Aldgate East station.

In the past, HM Revenue and Customs has said a VAT saving scheme is available to charities if they are buying or constructing new buildings, but not if they are renovating existing buildings. But the VAT tribunal said this contravened EU law.

"This is very encouraging news for charities because the cost of building and renovation work is often their largest outlay," said Debbie Jennings, VAT director at PKF. "Having to pay all of the VAT up front can push the overall costs into the realm of unaffordable.

"This ruling gives charities hope that any substantial renovation work they do in future will now be eligible for the VAT saving scheme."

But she cautioned that the EU was looking at removing VAT saving schemes from land and building altogether.

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