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Check the changes carefully

14 September 2012

What is happening with the promised changes to the VAT scheme for churches? Can we claim back VAT on improvements to our church yet?

WHEN they were announced in the Chancellor's Budget in April, the changes - removing improvements to listed buildings from the zero-rated VAT classification - were planned to take place from October onwards. So the new system, under which listed churches can reclaim VAT on improvements as well as repairs, will begin in October.

Until then, your improvements have been covered by zero-rating; that is, the contractor would agree not to charge VAT on those works - there is no reclaim mechanism in this category.

From 1 October onwards - and I have been monitoring the Listed Places of Worship Grant Scheme to get information as it appears - the Department for Culture, Media and Sport (DCMS) sets out the principles. It is carefully stated that the scheme now covers repairs, maintenance, and approved alterations. That means that the control of what you do to the building (and craziness in works to listed buildings was the motivation for change) rests with your need to have faculty approval for all the works for which you claim a grant against VAT.

The Government is adding £30 million to the scheme each year, for the duration of this Parliament.

The kinds of buildings that may make applications to the scheme are the same as they are now; it is simply that additional works are now covered, and the application process for all eligible works will be the same. Some repair items excluded from the list in the past year or two will now be reinstated.

Similarly, the scheme will go back to making monthly rather than quarterly payments to applicants.

Works to repair and maintain plumbing and electrical installations are again eligible for claims on the VAT. There may be some small print to check, but I have always found the scheme staff extremely helpful; so, if in doubt, phone them.

Most works to kitchen and lavatory fittings, floor coverings, and handrails are now eligible for the scheme, but movable furniture, shelving, noticeboards, and the like are not. Notably, where works create new lavatories for the disabled, these will still be zero-rated. Talk this through with your architect/project manager and your contractor, so that you are clear whether your lavatories are going to be zero-rated or reclaimable.

In one sense, it may not matter, as the scheme will repay VAT only as it appears on the contractor's invoices; so you will only get the benefit on what you actually pay; but you may want clarity yourselves. You can reclaim on floor coverings where they are a permanent fitting, such as stone or tiles, but not for carpet or removable tiles. You may want to check whether the heavy-duty linoleum in the lavatory area is covered; I suspect not.

Decorative works to the fabric of the building, redecoration, and works to carvings and stone are again eligible, and repairs to pews are back in. As they are classified as movable furniture, I suspect that the purchase of chairs to replace pews will not be eligible.

Asbestos removal is again eligible, as are crime -prevention and security measures, unless these are covered by insurance. If your insurer pays out the cost of repairs, but not the VAT, you may still be able to reclaim the VAT - check the new guidelines as they are published.

The DCMS will issue more detailed guidelines and application forms in late September. Visit lpwscheme.org.uk for more information.

Send your questions and comments to maggiedurran@virginmedia.com.

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