New Church Hall and zero-rated new build

Can the Hall charge for letting?

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My local Church built a new Church Hall a few years ago, and issued a certificate to the building contractor to obtain zero rating on the build costs for VAT, on the basis that it was for charitable purposes.  So far so good.

The Hall is currently used mainly by the Church itself, and by local community groups in return for a voluntary donation. In many respects the building is similar to a village hall as defined in VAT notice 708, para 14.7.4. 

The question is this: in addition to the community groups, if the Hall is let out for a fee to a few commercial operators (e.g. pre-school play groups or fitness classes), does this fall foul of the VAT zero rating as it is no longer being used just for charitable purposes.  Or is there some flexibility in the rules?

Many thanks.

 

Replies (3)

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By shaun king
26th May 2017 11:31

Easiest answer to this is to take paid advice

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By David Gordon FCCA
26th May 2017 14:07

It depends first:
Is your church part of the C of E or is it an independent community?
Many churches, synagogues, mosques, raise funds by letting out their halls and other facilities. it is a normal "Fundraising Activity"
What matters for VAT is the overall level of income.
Is the activity permitted by the Governing document?
2)Only if the relevant income received over the year exceeds the VAT limit, will you have to worry about VAT.

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By Chris Pittock
06th Jun 2017 12:51

I think the question related to the zero rating of the construction costs rather than the charging of VAT on the income. If the property is used for anything other than charitable activities (but I think if non-charitable use is less than 5% it can be regarded as incidental) within 10 years then you do have an issue. VAT 708 14.7.3 indicates fundraising is a business activity.

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