Budget delivers double blow
In his recent Budget, the Chancellor of the Exchequer unexpectedly announced that from 1 October 2012 the current zero rating which applies to alterations in listed buildings will no longer apply, and VAT will be charged at the standard rate of 20%.
At the same time, the reduced rate of 5% for repairs to listed buildings will no longer apply and will be charged at the standard rate of 20%.
Alterations to listed buildings will be rolled up into the Listed Places of Worship Grant Scheme (LPWG). It is understood that the Department for Culture, Media & Sport will be putting enough money into the LPWG Scheme (which is currently capped at about £13 million) to compensate for the withdrawal of the zero rate on listed buildings generally.
“However, this looks to us like bad news,” said Frank Cranmer, secretary to the Churches’ Legislation Advisory Service. “The estimated annual cost to charities will be at least £50m, and the Scheme as it stands is already under enormous stress – in the last quarter, claimants retrieved less than half the VAT to which they were entitled.
“Initially, the Treasury might provide sufficient funds to cover the increased calls on the Scheme – but how long will that last? Might it simply mean more players for the game of Listed Places Roulette?”
Other items from the Budget
- VAT – energy-saving materials: The Government will withdraw charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials – the necessary legislation will be in Finance Bill 2013. This was not wholly unexpected.
- Charitable donations and income tax relief: The Chancellor announced a cap on uncapped income tax reliefs from 6 April 2013. For anyone seeking to claim more than £50,000 of relief, a cap will be set at 25% of income or £50,000, whichever is the greater. This, we are told by the HMRC Charity Tax team, will include income tax relief for charitable donations.
The Budget documents state, however, that ‘The Government will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations’. - Small donations: The maximum value of a donation that will be eligible under the Gift Aid Small Donations Scheme from April 2013 will be £20 (rather than £10 as was announced at Budget 2011), presumably to cover the ‘£20 note in the offertory’ problem. However, the cap on eligible donations remains unchanged at £5,000.
- Inheritance Tax (IHT): The Chancellor confirmed that, as announced at Budget 2011, in respect of deaths on or after 6 April 2012, the Government will introduce legislation in the Finance Bill to provide for a lower rate of IHT of 36% where 10% or more of a deceased person’s net estate is left to charity.
To sign the e-petition to bring back zero rate VAT on alterations to listed churches, click here.