In recent years the experience of handling VAT when carrying out works to a church building has been similar to swimming in the Thames: hard work, subject to constant changes in direction, and ultimately leaving a bad taste in your mouth.
Since the Chancellor’s budget of 2011 listed church buildings have been required to pay VAT on all repairs, making projects considerably more expensive. However, in response to successful campaigning from the Church Buildings Council and other bodies concerned for the country’s heritage, the government provided a pot of money called the Listed Places of Worship Grant Scheme. This pot could be applied to for grants which would cover a church’s VAT expenditure on repairs. Good news.
VAT a lot of money
Unfortunately, the pot of money was not big enough. The sheer demand placed on this grant scheme meant that churches were compensated for as little as 42% of the VAT they had paid. Not only was this frustrating and expensive, it meant that reliably budgeting for a repair project was next to impossible.
This year, the game changed again. The Chancellor’s budget declared that alterations to listed buildings would be subject to the full rate of VAT (with some exceptions). This meant that churches which had saved enough money to install their new servery would now need an extra 20% to give to the Treasury. It left the Dean of Wakefield and his wife in a state of some hysteria!
A nationwide campaign was launched to petition the government against the introduction of these new financial burdens. Letters, e-mails, high-level meetings and several government petitions stressed the value of church buildings, their role within communities, and the costs incurred by the thousands of volunteers who manage our churches.
VAT good news!
As a result of these great efforts, especially from the Bishop of London, the government has relented. While VAT will still be payable for alterations to listed church buildings, the government has provided an extra £30,000,000 for the Listed Places of Worship Grant Scheme so that churches can apply to get some of their VAT expenditure returned. That’s an addition of nearly three times the current budget for the grant scheme.
These changes will take effect from October 2012. In the meantime, all repair works which apply to the LPWGS will have 100% of their VAT met by the scheme. This is an excellent commitment from the government as it means churches won’t need to wait around till the new budget is implemented before submitting applications.
There is no doubt that this concession is great news for church buildings. Planning a sustainable future will be made a great deal easier because of it. However, there are still a few uncertainties which remain:
There is no guarantee that the budget will stretch to cover all grant applications, though the Church Buildings Council suggests that it will. Churches must still find a sum of money to pay the initial VAT sum before any is recovered through the grant scheme, so budgeting is still more complicated. And alarmingly it is perfectly possible that the grant scheme itself will be withdrawn altogether at the next parliament. We should also avoid triumphalism, as the changes in the budget still require all other listed buildings to pay VAT on alterations, whether they are village halls or stately homes. The impact on the country’s heritage is yet to be known.
So while we celebrate the recognition that the government has granted to the importance of church buildings, we should remain cautious in the long term and remember to ask ourselves: VAT next?