On 21st March, 2012, the Chancellor of the Exchequer, George Osborne, announced in his Budget that the government intended to make the owners of listed buildings pay VAT at the standard rate of 20% on alterations to their premises.

At the moment, VAT is not payable on alterations to listed buildings because the work is Zero rated.

Leading conservationists and heritage experts have condemned the government’s proposal.

Loyd Grossman OBE FSA, Chairman of The Heritage Alliance said: “The very real fear is that this will discourage people from making improvements to listed buildings. It may make the difference between them having a future and losing them altogether. Previously the Treasury has never accepted that VAT was a single issue that could change development decisions, but this change may have the power to really influence decisions. I think it may prevent buildings from being altered in a way that gives them a sustainable future. Without mod cons such as kitchens, loos and disabled access, how can these buildings be adapted to modern use and earn their keep?”

Stephen Thornton, RICS UK Head of External Affairs said: “Lower VAT on historic buildings than on new build would encourage the improvement of existing stock and this increase will create further barriers to the improvement of this stock and stifle job creation. Instead, an incentive to improve our highly valued heritage has been removed. The Chancellor has missed a golden opportunity to create a level playing field of 5% VAT on all home repair, maintenance and improvement work.”

Brian Berry, Chief Executive of the Federation of Master Builders said: “This move shows the Government really is out of step with the industry’s wishes and the needs of the UK’s heritage buildings. Increasing VAT on alterations to listed buildings by 20% will prevent many from carrying out important improvement work, and will in turn put many more building firms at risk. If the Government is serious about supporting growth in the economy and cutting carbon it should focus on measures to encourage property owners to improve the UK’s existing buildings, and not do the opposite. The harmonisation of VAT at 5% for all housing repair, maintenance and improvement work would create jobs and reduce the competitive advantage of those operating in the informal economy.”

Harry Cotterell, President of the Country Land & Business Association said: “What has happened with VAT for work on listed buildings is not fiscally neutral. It is appalling that the rate for repairs is to stay at 20% and the rate for alternations is to rise to 20%. This is purely revenue-raising by the Chancellor, unconvincingly dressed up as support for heritage. It won’t help heritage one jot – it will do great harm.”

Jo Evans, Chair of the Institute of Historic Building Conservation said: “In the absence of wider sector involvement in these proposals, they represent a missed opportunity to rationalise VAT in ways that would benefit jobs, the environment and the economy by encouraging building care, maintenance and improvement. Instead the proposals will use the VAT regime to penalise further low carbon, high skilled maintenance and regeneration opportunities – often community based when they involve the heritage sector – in favour of high carbon alternatives already readily funded through more mainstream industries that focus on demolition, disposal and new build.”