Many farmers and landowners own properties which are classed as protected (listed) buildings. Proposed legislation was announced in the recent Budget which may mean a future VAT liability will arise as a result of work carried out on such buildings. Therefore if work is to be carried out, it may reduce VAT liabilities if the work is carried out before the end of September 2012.
What is the current VAT treatment of listed buildings?
Currently, zero-rating applies to “approved alterations” to a listed building. Approved alterations cover works under planning consents and comprise changes to the fabric of the building.
Zero-rating also applies to the first sale or long lease of a substantially reconstructed listed building. This means that VAT can be recovered on the work carried out prior to the sale or grant of the lease.
How will the proposed changes affect the VAT treatment?
The proposed changes will mean that future approved alterations are likely to be standard rated and therefore incur a VAT cost of 20%. However it is possible that the reduced VAT rate of 5% might be available in certain circumstances.
The zero-rating is not to be removed entirely for the first sale or long lease of a substantially reconstructed listed building. It will be retained for buildings reconstructed from a shell. Otherwise the sale of the reconstructed building will be exempt from VAT, resulting in irrecoverable VAT on associated costs..
The proposed changes to the VAT treatment of such buildings may mean that a VAT “cost” will occur in the future as a result of work done on such properties or a sale/lease of such a property. Therefore, if work is planned in the future on a listed building, the possibility of carrying out the work before the end of September 2012 should be considered in order to minimise future VAT liabilities. Similarly, the first sale or long lease of a substantially reconstructed listed building may need to take place before the end of September 2012.
Hazlewoods Indirect Tax Team will be happy to assist you in this matter. Please call Adam Lloyd or Julian Millinchamp on 01242 237661. For any other tax planning issues, please contact Nick Dee or Peter Griffiths on 01242 680000.