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Budget 2012: Listed buildings VAT relief scrapped

The government has scrapped VAT relief on alterations to listed buildings as part of its 2012 budget

From October 2012, alterations to statutorily listed buildings will be taxed – in line with repairs to listed buildings which are already taxed. VAT will also be levied on self-storage.

Historic organisations umbrella group The Heritage Alliance described it as a ‘shock decision’ which jeopardised the future of heritage buildings.

This announcement is totally unexpected

In a statement, it said: ‘The Heritage Alliance is concerned this drastic change could have a devastating impact on the future of listed buildings across the country, as it presses yet more costs on communities working to give them a new lease of life - such as through adding toilet facilities or disabled access.

‘HMRC justifies this change because in its view “the majority of the work covered by the relief consists of extension work which is not necessary for heritage purposes” - yet we say the majority of the work is essential for heritage purposes, as without such alterations heritage buildings cannot have a future.’

RIBA Conservation Group chair Robert Franklin said: ‘There is a real concern from the RIBA that the planned increase from zero to twenty percent VAT for alterations to listed buildings could have a debilitating economic impact on development in the historic environment.

‘While VAT may discourage some inappropriate proposals, I fear a 20 per cent rate, so suddenly applied, will make it unaffordable for listed building owners to make necessary alterations to many of our cherished buildings, whether for correcting past mistakes or bringing up to date for new uses.  The economics of such schemes may increase the number of buildings ‘at-risk’, through pressure to demolish and replace with new-build, particularly for housing which remains zero rated.”

DPP Head of Heritage Emma Adams added: ‘This announcement is totally unexpected. In my experience, while the previous VAT exemption encouraged alteration over repair and maintenance it did help to facilitate adaptations which could secure the long term use of listed buildings if and when sensitive design was applied.

‘Moreover, in these examples, the VAT exemption helped to make up for the “extra mile” in design quality that is needed to secure consent as well as helping to offset the additional cost of the materials required for works to listed buildings.’

She added: ‘There are those who would question whether the market understood the previous VAT exemption anyway but regardless, the likelihood now will be that any developers or funds looking at opportunities across their portfolios will be more cautious about taking on a Listed Building.

‘This is a great shame. Awareness of the potential value and opportunities that exist for sensitive, design-led alterations to listed buildings has been steadily improving among developers, with a positive impact on investment in this specialised market sector.  Given the attractiveness of historic buildings to many potential occupiers and the strength and flexibility of our built heritage (given intelligent, sensitive design) to meet modern requirements and the stagnancy of the new development pipeline surely incentives for alterations should continue. We wait to see what impact this legislation will have on the future of development in this sector as further detail is revealed.’

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