'Heritage Tax' expected to hit Grade One and Two listed buildings for £450m

Published 16th Apr 2012

George Osborne’s plan to impose a ‘Heritage Tax’ on listed buildings would rake in almost half a billion pounds – with nearly a quarter coming from the Church of England.

Figures buried in Treasury documents reveal the full implications of the Chancellor’s move to ‘simplify’ the VAT treatment of alterations to listed buildings.

Grade One and Grade Two listed buildings currently incur VAT only on routine repair work, for example to a damaged roof, and not on improvement, alteration and restoration works.

However, the exemption will end in October under new measures in the Budget and the rate will rise to the standard 20 per cent. In the next five years, the tax hike is expected to raise £450million for the Treasury. The Church estimates the move will cost congregations £20million a year – equal to £100million over the next five years.

Other heritage groups have issued warnings over the plans, with the National Trust suggesting it will cause problems for the owners of listed buildings, who already typically face higher costs for improving or repairing their homes. Although straightforward repair works on listed buildings have long attracted VAT, churches are able to claim much of the money back from a special government fund.

The rebate scheme is to be extended to cover alterations. But only £5million of new money has been announced, and the latest figures suggest churches are already unable to claim back more than half of the VAT they incur on renovations. In the West Country, the proposal has been dubbed the ‘thatch tax’ because of its potential impact on the region’s thatched cottages. Andrew Raffle, secretary of the National Society of Master Thatchers, said: ‘Unfortunately 20 per cent is a huge amount of tax.’

The Treasury insists the move will end an ‘anomaly’ which allows millionaires to install improvements such as swimming pools without paying VAT just because they happen to live in a listed building.

Despite the extra £5million made available to help soften the blow to the Church, the proposals have caused anger across the country, with many congregations seeing their hopes of building improvements disappear. Yesterday the deans of 23 cathedrals including Canterbury, Durham and York signed an open letter to Mr Osborne urging him to ‘change his policy to one that will support rather than damage our nation’s heritage’.They warned that the move ‘seriously damages the sustainability of many of our great buildings’.

Anthony Priddis, the Bishop of Here ford, believes a VAT bill of £150,000 could wreck plans for improvement to the cathedral. He said: ‘There has been more anger about this decision than any other I have witnessed for a very long time.’

Church estates commissioner Tony Baldry, Tory MP for Banbury, Oxfordshire, has written to the Chancellor urging a rethink. He said: ‘It is now going to be 20 per cent more expensive for communities up and down the country who are trying to make buildings more adaptable.

‘It has been difficult to see the evidence Treasury officials have for the use of it. I hope ministers will understand the concerns of local communities.’

Canon Tony Dickinson, of St Francis of Assisi church in High Wycombe, Buckinghamshire, which is in the middle of a £250,000 renovation project, said: ‘We are not a large congregation and we don’t have a long history of resources. It is all a bit like playing roulette. We are quite worried. My treasurer gets greyer and more lined each time I see him. We live in hope that people will respond generously as it is a landmark building.’

Jonathan Greener, Dean of Wakefield Cathedral, where a £3million restoration project is under way, estimated the new tax would add £200,000 to the bill. He described the plans as a ‘raid on our nation’s heritage’.

Churches say they are investing increasingly heavily in alterations to bring their buildings up to date and open them up for community use.

The Treasury insists the measure is justified. A spokesman said it was unfair that wealthy individuals were able to make alterations to listed mansions without incurring VAT.

‘Over time significant anomalies have developed, causing very similar products to be taxed very differently. The Government is taking steps to correct these anomalies, including aligning the alterations of listed buildings with the existing VAT treatment of repairs.’

Source: ' ThisIsMoney '

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