Plan care­fully to min­imise VAT costs on listed build­ings

Yorkshire Post - Property - - PROPERTY - Brian Birt

THE re­moval of VAT zero rat­ing for ap­proved al­ter­ations to listed build­ings was an­nounced in the last Bud­get.

Many of those sup­port­ive of re­tain­ing the na­tion’s her­itage have op­posed this change but the op­po­si­tion has been largely in­valid as the pub­lic out­cry only per­suaded the Gov­ern­ment to pro­vide a very short term tran­si­tion pe­riod.

Those who work in the con­struc­tion in­dus­try and who un­der­take con­tracts to al­ter listed build­ings will be aware that the VAT cost on such works from Oc­to­ber 1 2012 will be 20 per cent. This is in line with VAT stan­dard rated “re­pair and main­te­nance” charge ap­plied at present. The change will par­tic­u­larly af­fect many char­i­ties, reli­gious or­gan­i­sa­tions and own­ers of pri­vate houses.

Rather than dwell on the demise of the zero rat­ing, let’s con­cen­trate on how to min­imise the im­pact of these VAT changes. The prac­ti­cal­ity is that hav­ing a VAT cost at source will now be a very im­por­tant con­sid­er­a­tion for those af­fected and will play an im­por­tant part when pre­par­ing ten­der ap­pli­ca­tions and bud­gets.

The var­i­ous tips set out be­low are aimed at those who may in­cur these new VAT costs post Oc­to­ber 1 2012 and they are set out in an or­der to max­imise VAT re­liefs in the most sim­ple fash­ion. They range from ques­tion­ing the tim­ing of cur­rent projects through to the op­ti­mal use of the par­tial ex­emp­tion method.

Con­sider if you are en­ti­tled to Tran­si­tional Pe­riod Re­lief. Zero rat­ing can still ap­ply un­til Septem­ber 30, 2015 if the con­tracts were en­tered into or plan­ning con­sent for such works was made be­fore March 21, 2012. There is also pro­vi­sion where 10 per cent of a “sub­stan­tial re­con­struc­tion” was com­pleted be­fore March 21. The ex­ten­sion of the zero rat­ing for works to be com­pleted un­der such con­trac­tual ar­range­ments will be the eas­i­est to fa­cil­i­tate and cause the least prob­lems for all par­ties.

Ap­ply to The Listed Places of Wor­ship (LPW) grant scheme. The Gov­ern­ment has boosted the scheme by al­lo­cat­ing an ad­di­tional £30m. Al­though the VAT has to be funded up­front, a good knowl­edge of the LPW should en­sure a size­able re­pay­ment of the VAT costs. Ap­pli­ca­tions should be made as early as pos­si­ble.

A sale of a Sub­stan­tially Re­con­structed Listed Build­ing re­mains zero-rated. This ap­plies to free­hold sales or long lease­hold con­veyances (a lease with a 21 year-plus pe­riod). With care­ful plan­ning proper tax struc­tures may en­sure 20 per cent VAT sav­ings where the listed build­ing is to be “sub­stan­tially” re­con­structed.

Sim­ple VAT plan­ning and ad­min­is­tra­tion. Nor­mal VAT rules must not be for­got­ten in the plan­ning of bud­gets. In par­tic­u­lar, char­i­ties need to con­sider max­imis­ing all avail­able re­liefs, such as the dis­abled ac­cess VAT re­liefs. VAT-reg­is­tered char­i­ties should also make bet­ter use of im­proved par­tial ex­emp­tion spe­cial meth­ods. A fi­nal ad­vice point is that when pro­cess­ing the pur­chase VAT, the fi­nance staff should post the VAT in an op­ti­mal at­tri­bu­tion mat­ter.

En­sure that the VAT Re­duced Rate for Con­struc­tion Ser­vices is ap­plied where ap­pro­pri­ate.

Al­though zero-rat­ing may be in the process of be­ing re­moved for listed build­ing al­ter­ations, we must not for­get that there are other quite sig­nif­i­cant VAT re­liev­ing pro­vi­sions. With that in mind there may be in­stances where the al­ter­ations may qual­ify for the re­duced five per cent VAT rate.

Nor­mal VAT rules must not be for­got­ten in the plan­ning of bud­gets. It will be­come even more im­por­tant to take VAT ad­vice in terms of dis­cussing the stick­ing ef­fect of the in­creased VAT costs. In par­tic­u­lar, char­i­ties need to con­sider max­imis­ing all re­liefs such as the dis­abled ac­cess pro­vi­sions; and mak­ing the most use of im­proved par­tial ex­emp­tion sce­nar­ios where they are VAT reg­is­tered.

Brian Birt is a VAT con­sul­tant at Gar­butt El­liott, www.gar­but­tel­liott.co.uk, tel: 01904 464100.

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