HM Revenue & Customs will scrap proposed tax changes that could have cost the charity sector tens of millions of pounds in VAT on construction projects, it confirmed yesterday.
In June, HMRC published plans to change rules for 'design-and-build' construction that would have meant the sector having to pay VAT at the standard rate of 20 per cent on fees for professional services involved in construction, instead of the current zero rate.
However, an HMRC spokesman said no change in the VAT treatment of design-and-build contracts was now being considered.
Graham Elliott, VAT partner at the accountancy firm haysmacintyre, said the proposal could have added tens of millions of pounds to the sector's VAT bill.
Peter Jenkins, a technical adviser on VAT to the Charity Tax Group, said HMRC had listened to the legal arguments the CTG had put forward.
"We’ve had a positive result and they’ve accepted our arguments," he said. "I would give HMRC huge credit for the way they’ve responded to this quickly."