Page 203 - The Building Conservation Directory 2013

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Useful Information VAT Update
Julian Potts
In the 2012 Budget on 21 March it was
announced that the zero rate for approved
alterations to protected buildings would be
removed with effect from 1 October 2012.
This measure affects works to listed
residential dwellings and certain other listed
buildings used for qualifying charitable and
residential purposes. Approved alterations are
alterations that both require and have listed
building consent but do not include works
or alterations carried out for the purposes of
repair and maintenance.
Her Majesty’s Revenue and Customs
(HMRC) gave the following reasons for
removing this measure:
1) it removes ‘the perverse incentive
to change listed buildings
rather than repair them’
2) it removes the need to consider the
borderline between determining what
works are zero rated alterations and what
are standard rated repair and maintenance
works – an area that leads to high levels
of uncertainty and to potential errors.
HMRC also released a consultation
document at the time of the Budget entitled
VAT: Addressing Borderline Anomalies
seeking responses to various questions and
a summary of responses was released on
28 June 2012. This document confirmed
the changes would be implemented despite
considerable resistance from charities,
heritage bodies, businesses and churches.
In summary the new rules are as follows:
1) where listed building consent was
applied for before 21 March 2012, or
where a contract was entered into
before that date, a construction project
will continue to qualify for zero rated
treatment on approved alterations
up until 30 September 2015
2) construction projects where listed
building consent was applied for after
21 March 2012 will qualify for zero rated
treatment on approved alterations up until
1 October 2012
3) the zero rating for the sale of
substantially reconstructed protected
buildings will continue but in future
will only apply where the protected
building is reconstructed from a ‘shell’.
Substantial reconstruction projects
where more than 10 per cent (by
reference to cost) was already completed
prior to 21 March 2012 will qualify
as zero rated sales under the existing
rules (seewww.hmrc.gov.uk/manuals /
vconstmanual for details)
4) legislation will be introduced to prevent
forward payments being made to take
advantage of the zero rating before
its removal.
Listed Places of Worship
Grant Scheme
The Listed Places of Worship Grant Scheme
currently provides a partial refund of VAT
for eligible repair works to qualifying
listed places of worship. The government
has announced that from 1 October 2012,
following abolition of the zero rate for
alteration works, the scheme will be extended
to allow for refunds of VAT on standard rated
approved alteration works in addition to the
eligible repair works. Additional funding
will also be made available to the scheme.
What to do next
1) Check the date listed building consent
was applied for – if it is before 21 March
2012 then zero rating can still apply to
a project up to October 2015. Minor
changes to a pre-21 March consent made
after the cut-off date are also acceptable
providing they are minor or relate to
unforeseen issues not identified at the
time of the original application.
2) Check the date the contract was signed
for construction works – if it is before
the 21 March 2012 then zero rating can
still apply to a project. Minor changes to
a pre-21 March consent made after the
cut-off date are also acceptable providing
they are minor or relate to unforeseen
issues not identified at the time of the
original application.
3) Developers planning to sell a reconstructed
protected building should assess whether
ten per cent of any reconstruction had been
completed before 21 March 2012.
4) Generally ensure zero-rating on altered
protected buildings is maximised on
past and present building contracts.
Retrospective adjustments can be
made up to four years after the works
are carried out. For example, if a
contractor wrongly charged 20 per
cent VAT on works they could be
approached and asked for a repayment
of the over-collected VAT amount.
It is also worth remembering that lower
VAT rates still exist for the following
types of construction project irrespective
of whether the building is listed:
Zero rating
1) the construction of new build
dwellings including a scenario
where a pre-existing building is
demolished apart from a single facade
or a double facade (on a corner site)
where its retention is a condition or
requirement of statutory planning
consent or similar condition
2) certain adaptations for disabled
persons.
Reduced 5 per cent rate
1) conversions which result in a change
in the number of dwellings, including
a conversion from a non-residential
building to a new dwelling or
dwellings
2) renovation of a dwelling that has not
been lived in for at least two years
3) installation of certain energy saving
materials including solar panels,
ground source or air source heat
pumps, draught proofing windows
and doors.
It is important to note that some items
will always remain 20 per cent rated for
VAT such as fitted furniture other than
kitchen furniture, certain gas and electrical
appliances and carpets. For each VAT
relief there are also various conditions
to meet in terms of the type of dwelling
concerned and the planning status.
Special refund schemes
It is also worth remembering that self
builders and converters can reclaim VAT
they have incurred on the creation of a
new dwelling constructed or converted
for private occupation. As before, there
are numerous conditions to be considered
in order for a claim to be successful.
Julian Potts is a director of property tax
consultancy Landmark PT Ltd, which has
offices in Bath and London. He specialises
in offering VAT planning advice for private
individuals, building contractors and
property developers. His publications
include VAT in Property & Construction
published by RICS Books. Email julian@
landmarkpt.com
Alterations to listed buildings are no longer to be zero-rated,
although listed places of worship will continue to benefit
from a grant scheme.