I finally got clarification today on something that has been bothering me for ages. I had head anecdotes about VAT (Value Added Tax) on historic listed buildings, ie. That there is no VAT to pay. At present VAT is 15% and will go up to 17.5% in January and maybe even higher after the election in 2010. A saving of that kind is substantial and could be the difference between the project going ahead or dying at the outset.
Because I'm an Architect and not a tax expert, I have always advised my client who own Listed buildings (quite a lot in Edinburgh) to seek the advice of their Accountants (also quite a lot of these in Edinburgh). Today however, I called the RIBA and spoke to their VAT expert, Jim Pinder of Accounting Firm BDO.
Mr. Pinder advises that the zero rating of Listed buildings for VAT purposes only applies in the following circumstances:
1.If the building is being used for residential purposes and not commercial. So only for private homes and not shops or offices.
2.Only work which is deemed an improvement or upgrade may be zero rated, repairs are not included in the work. This is going to upset several clients who take on Listed Buildings for their 'character'. It may be more tax efficient to make some alterations than to just restore the fabric to its former glory.
3. Only work which is specified in the Listed Building Consent is included in the scheme. It would be wise then to include as much detail as possible in the Listed Building Application. As each item of work described will be zero VAT rated when the application is approved.
Finally, it is the builders responsibility to arrange all of the necessary paperwork, not the clients. This could present a problem for the builders cash flow, as they will have to pay the VAT on all materials and labour first and seek a rebate once every three months, when VAT returns are made.
It could also be an opportunity for the builder to charge a higher fee or to ask for a larger deposit up front.
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