Charities could lose more than £63m a year if the government goes ahead with proposals announced in the Budget to charge VAT on improvements to listed buildings , the Charity Tax Group has warned.
Documents released alongside today’s Budget speech said that the government would hold a consultation on charging VAT on "approved alterations" to listed buildings as part of moves to clear up anomalies in VAT legislation.
Improvements to listed buildings, such as installing wheelchair lifts or improving toilets and heating, are currently zero-rated for VAT. But a consultation paper from HM Revenue & Customs proposes that the relief be abolished from 1 October this year. Repairs to listed buildings already attract VAT at the full rate of 20 per cent. The consultation closes on 4 May.
However, the government will extend an existing grant scheme that covers some of the VAT on repairs to places of worship – it will now also cover VAT on improvements, the documents say. The paper does not say whether the size of the fund would be increased to reflect the additional demand.
Peter Jenkins, special adviser on VAT to the CTG, said: "The decision to remove VAT relief on alterations to listed buildings will have a substantial effect on charities. It’s likely that about three-quarters of the £85m will be lost by charities.
"There are between 35,000 and 50,000 listed buildings, and this will affect about 1,000 cases a year.
"There’s a more general VAT relief for the construction of charitable buildings and I worry that this could be under threat as well. However, I’ve been reassured by HMRC that this won’t be the thin end of the wedge."
Crispin Truman, chief executive of the Churches Conservation Trust, said: "It would be quite bad news. We have done a lot of alterations to listed churches that have been zero-rated and have given new life to buildings. For local communities struggling to save their church and for church buildings paid for by local volunteers this is yet another burden."
See our round-up of stories on the 2012 Budget