Approved Alterations and Listed Buildings

Les Howard
VAT Consultant
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With effect from 1 October 2012, approved alterations will cease to be zero rated. Whilst I understand the complexity of such projects, this change of legislation will add substantial costs to those residents (and developers) seeking to restore such buildings to something like their original design.

The Government has extended the Listed Places of Worship Scheme, whereby a grant, equivalent to the standard rate of VAT, would be paid where the Listed Building is used as a place of worship. This scheme ( is operated by the Department for Culture, Media and Sport, not HMRC.

However, the change remains in place for other Listed Buildings. The Budget note is at and is set to raise around £100m pa from 2015/16. (Contractors tell me that the most likely consequence is that owners will use unregistered ‘cowboy’ builders, so as to save the VAT cost. Work will be done badly, and tax will be lost.)

One option that some owners of Listed Buildings are already considering is whether the 5% reduced rate may be applicable. Two alternatives may be considered:

  1. Where there is a ‘changed number of dwellings’ conversion. This means that the number of separate dwellings within the property is changed. In one example, a four-storey town house was divided into two dwellings, each with separate legal title, entrance, and Council Tax charge. The owner re-developed the property into a single dwelling. The number of dwellings is reduced from 2 to 1, and the 5% rate applied. The VAT ‘saving’ was significant.
  2. Where a ‘residential alteration’ takes place. This is where the property has been empty for 2 years. The refurbishment of such a building. Again this work can be charged at the 5% rate.

Care must be taken to ensure all the conditions for the reduced rate are fulfilled.


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