For years, owners of listed homes had lived with an odd rule. Repairs to a listed building attracted VAT at the standard rate, while approved alterations, works needing and given listed building consent, could be zero rated. On 1 October 2012 that relief ended. Following the announcement in the March 2012 Budget, approved alterations became standard rated at 20 per cent.
Who was affected
- Owners of listed houses and flats carrying out alterations with listed building consent.
- Charities and others using listed buildings for qualifying residential or charitable purposes.
- Developers converting or altering listed buildings, depending on the type of work. Some conversion work may still qualify for a reduced rate, so take advice.
Limited transitional relief applied to some projects already committed before the Budget announcement. Whether a particular project qualified depended on its facts, and on dates, so it was important to check with a VAT adviser.
What it meant in practice
On an alteration costing £50,000 before VAT, the owner who could not recover VAT now paid £10,000 more than before. For many private owners of listed homes, that changed the sums significantly.
What owners can do
- Revisit the budget. Schemes priced at zero rate needed updating.
- Prioritise repairs. The gap between repairs and alterations has gone, so the old incentive to frame work as alteration no longer exists. Decide on the basis of what the building needs.
- Look at the whole programme. Combining work into one contract can reduce scaffolding, preliminaries and professional fees, offsetting some of the extra tax.
- Do not cut corners on consent. Listed building consent is still needed for works affecting character, whatever the VAT position. Unauthorised works to a listed building are a criminal offence.
Specification still matters
Good conservation practice, using appropriate materials and repairing rather than replacing where possible, often costs less over the life of the building than a quick fix. A clear specification supports the consent application and keeps tender prices comparable.
Our Planning and Heritage service advises listed building owners on consent and specification. See how we took a Grade I listed town house from consent to completion.