VAT change throws spanner into works at listed churches

19 April 2012

by Madeleine Davies

Alphabet: York Minster features on a new first-class stamp in the UK Landmarks A-Z Part Two stamps set (M-Z) released on Tuesday. The price of a first-class stamp goes up from 46p to 60p on 30 April

Alphabet: York Minster features on a new first-class stamp in the UK Landmarks A-Z Part Two stamps set (M-Z) released on Tuesday. The price of a first...

OPPOSITION to the “Heritage Tax” imposed by the Government in the Budget is rallying as dioceses around the country provide examples of renovation projects “paralysed” by the policy.

In a letter to last Sunday’s Sunday Times, 23 deans warn that paying 20 per cent VAT on alterations to build­ings is “likely to prove unmanage­able”. “How can a self-styled Big Society government issue a budget that appears to be so incon­sistent with its commitment to, and reli­ance on, the voluntary and charit­able sector?” they ask.

The Treasury estimates that charging VAT on alterations will secure £450 million of revenue by 2016. The deans argue that the sum will not be realised, because “much of this work will simply not happen.”

The Dean of Newcastle, the Very Revd Chris Dalliston, one of the signatories, said that the proposed tax was a “huge blow” to the cathedral’s £3-million renovation project. It could “derail” plans to install new heating, improve access, and reorder the nave for worship, concerts, exhibitions, and other cultural activities.

The Bishop of Hereford, the Rt Revd Anthony Priddis, said that the change could be a “disaster” in his diocese, where most of the historic churches are Grade I or Grade II listed. He gave the example of plans to “transform” St Deinst’s, Llangarron, originally expected to cost £400,000 to complete, but now requiring an additional £60,000.

Wendy Coombey, Community Partnership and Funding Officer for the diocese, said that the VAT bill would double the amount that the parish had to raise. “In community devel­opment projects like Llan­garron, many people who are not in church on Sunday are involved, as the church building at the centre of their community is important to them,” she said.

“I feel that a long-term conse­quence of all these additional blows to our church funding, coupled with a particularly poor funding climate anyway, may eventually result in some parishes’ giving up and considering closure, which is a great pity. I am usually terribly optimistic about the abilities of our parishes to fight to stay open and develop, but I am really struggling to see a light for many of them at the moment.”

The Archbishop of Wales, Dr Barry Morgan, has written to the Chancellor to express his concern about the tax change. The Church in Wales estimates that it could cost its parishioners an extra £800,000 a year — 20 per cent of the cost of work carried out. It owns nearly 1000 listed churches, including 29 per cent of the Grade I buildings of Wales.

“For listed places of worship, change is often very necessary to ensure the building plays its full part in the community,” Dr Morgan wrote, giving the example of access for people with disabilities. “Else­where, including new facilities can make that building play a full part in providing for a community — it is not change for profit, but change for the benefit of commun­ities.”

On Tuesday, the Bishop of South­wark, the Rt Revd Christopher Chessun, told The Evening Standard that the extra cost would “damage the ability of the Church and others to undertake important work in building social cohesion”.

The RC Archbishop of West­minster, the Most Revd Vincent Nichol, said that the move was “regrettable”.

The Labour Party opposes the Chancellor’s plans. On Tuesday, David Anderson, the Labour MP for Blaydon, Gateshead, told the House of Commons that the change to VAT had had a “disastrous impact”. He described how Holy Cross, Ryton, in his constituency, had “magni­ficently” raised £300,000 in 15 years, but would have had to raise £360,000 “to do exactly the same work”. “People are telling me that that fills them with despair.”

On Saturday, Harriet Harman, the Labour deputy leader, said that the Government was using the VAT to fill a “black hole in the coffers that’s partly been created by cutting the top rate of tax to the wealthiest people”. In a letter to the Culture Secretary, Jeremy Hunt, she warned that the Government’s plans threat­ened both the future and the past.

“In his Easter message, the Prime Minister told the nation that the values of the Church make our country what it is. But this year’s Budget threatens churches across the country that serve their congrega­tions and wider communities.”

The day after the Budget, the Bishop of London, the Rt Revd Richard Chartres, and the Second Church Estates Commissioner, Tony Baldry MP, both wrote to the Chan­cellor, asking him to keep altera­tions to listed churches exempt from VAT. It is understood that they are to meet with Mr Osborne next week.

Her Majesty’s Revenue and Cus­toms (HMRC) has launched a consultation on proposed changes to VAT, which is open until 4 May. It states that most alterations are “not necessary for heritage purposes”, and argues that the current rules give a “perverse incentive” for change as distinct from repair. The borderline between alterations and repair is “a major source of confusion”.

But Anne Sloman, who chairs the Church of England’s Church Build­ings Council, who has also written to The Sunday Times, said that the “vast majority” of new works were “aimed at enabling our churches to serve the community”.

“The state gets an enormous bar­gain from the Church of England in the care of our 12,500 listed build­ings. It is difficult to under­stand why we are being punished for it.”

If the change goes ahead, the Church of England foresees an addi­tional annual VAT bill of £20 million. It is responsible for 45 per cent of all Grade I listed buildings in the coun­try, and the majority of its buildings — 12,500 out of 16,000 — are listed.

The Chief Secretary to the Trea­sury, Danny Alexander, told the Commons on Monday that the Gov­ernment had pledged to increase the Listed Places of Wor­ship scheme by £5 million a year, “pre­cisely to enable churches that have al­terations to benefit from the scheme and not to be adversely affected”.

On Wednesday, Mrs Sloman described the extension as “not a very good deal”. “It is not at all clear whether this is a one-off or an annual payment, and it’s not clear whether it’s even new money,” she said. “The Listed Places of Worship Grants Scheme is already running at a shortfall of £11 million.”

The policy on VAT on alterations is not the only one to pose a finan­cial threat to churches. The Dean of Canterbury, the Very Revd Robert Willis, one of the signatories of the letter to The Sunday Times, told the Financial Times on Saturday that the proposed cap on tax relief for charit­able donations would have a de­leteri­­ous effect on plans to raise £3-4 million for renovations to Canter­bury Cathedral.

An e-petition lobbying the Gov­ern­ment to abandon the VAT-change policy had attracted 14,671 sig­natures at the time of writing.

Leader comment: Another raid on church finances
Letters: Churches’ predicament over VAT

Leader comment: Another raid on church finances
Letters: Churches’ predicament over VAT

Coronavirus (Covid-19) update

The latest: Daily news updates

Get the free Church Times email bulletin


> Lift Up Your Hearts: 3 April (PDF download)

> All our recommended resources for prayer, worship, live streaming and more


Unable to get to the newsagent or pass on your copy of the Church Times as usual?

Get the paper delivered for the next few weeks

Welcome to the Church Times

​To explore the Church Times website fully, please sign in or subscribe.

Non-subscribers can read four articles for free each month. (You will need to register.)