Call for VAT on listed buildings to be changed ahead of October deadline
12-07-2012
 |
On 01 October 2012 the UK government is lifting the exemption on VAT to listed buildings, which it terms an ‘anomaly’, and imposing VAT at 20% to all alterations and restorations in a move which will cost owners of listed buildings thousands of pounds just to ensure their property does not fall into disrepair.
Preservation of a listed building involves dedication in time and money due to the more expensive methods and materials required to maintain them. The Royal Institution of Chartered Surveyors (RUCS), along with much of the property industry, fears that the extra 20% levied against owners of these buildings will mean these essential works will no longer be financially viable. As a result many owners of listed properties are rushing to complete works and ensure the survival of the building and Britain’s heritage.
Maryann Richmond-Coggan is one owner who is rushing to complete the restoration works to a listed barn. ‘We fell in love with our home straightaway and knew we wanted to restore the full property to its former glory. However, we could not have envisaged the commitment it would require in terms of money and time, although it has been extremely rewarding,’ she said.
‘We are now hoping to complete the restoration work to the Grade II Listed barn in the grounds for use as a holiday let in time for the October deadline. By completing ahead of the deadline we will save around £40,000 to £60,000. Quite simply, with those added costs, we could not even have considered undertaking the project,’ she explained.
BR> The lifting of the VAT exemption is also impacting on the desirability of listed properties to property investors, leaving many languishing on the market. Marion Money recently completed the conversion of her listed building into apartments. ‘The Grade II listed building had been vacant for some time after the commercial tenants who used the property as an office moved out. In the economic climate I was unable to find new tenants for the offices and decided to convert it into a residential property,’ she said.
‘This was a costly enterprise and the returns are comparatively low. Had there been an additional 20% to pay in VAT costs the investment would not have been economically viable and the property would have continued to rot unoccupied and, most likely, further decreased in value,’ she explained.
BR> ‘The VAT exemption is a very important concession for buildings that require specialist works by specialist trades with specialist materials at specialist prices. Rather than be lifted, I feel strongly that the VAT concession should be extended to include routine maintenance not just capital expenditure,’ she added.
RICS, as part of the ‘Cut the VAT Coalition’, is calling for the government to abandon the introduction of 20% VAT to listed buildings and introduce VAT at 5% on all home repair, maintenance and improvement works.
‘The Chancellor has missed a golden opportunity to create a level playing field on all residential works. Research shows that five per cent VAT across the board would create 26,560 jobs in the construction sector with a total economic stimulus of around £1.7 billion in 2012 alone,’ said Stephen Thornton, UK head of external affairs at RICS.
RICS’ view is being echoed throughout the property industry with many lending their voice to the condemnation surrounding the lifting of the VAT exemption.
Cluttons is advising caution to clients whose projects will start before the deadline but finish after, which will lead to complicated VAT assessments. ‘Listed buildings are some of our country’s greatest assets. Removing the VAT exemption on alternations will mean the difference between a bright future and a miserable end, with potential investors and current owners simply unable to foot the bill for this extra expenditure,’ said James Gray, head of Project and Building Consultancy at Cluttons.
‘Listed status means improvements and alterations have to use traditional methods and materials, which are already themselves more expensive that for non-listed property. The exemption gave some respite and, in some cases, meant the building had a future. The responsibilities of owning and looking after often fragile listed properties are demanding enough. Any disincentive will, in the long run, damage our nation’s heritage,’ he pointed out.
Emma Adams, Head of Heritage at DPP, explained that whilst the previous VAT exemption encouraged alteration over repair and maintenance, it did help to facilitate adaptions which could secure the long term use of listed buildings. ‘Moreover, in these examples, the VAT exemption helped to make up for the ‘extra mile’ in design quality that is needed to secure consent. 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,’ she said.
‘This is a great shame. Given the attractiveness of historic buildings to many potential occupiers the strength and flexibility of our built heritage to meet modern requirements and the stagnancy of the new development pipeline, surely incentives for alterations should continue,’ she added.
