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Claiming VAT on eligible expenditure

28 March 2014

Our architect has advised us that the disabled-access ramp and accessible lavatory in our building programme are zero-rated for VAT. Since we plan to reclaim VAT under the Listed Places of Worship (LPW) Grant Scheme, this information seems irrelevant - or should we be taking action?

YOU should be taking action. There are two separate systems: paying VAT on works and then reclaiming; and having work zero-rated and not reclaiming.

The stinger is that if your builder charges you VAT on zero-rated works, you cannot reclaim this VAT through the Listed Places of Worship Grant Scheme. When your building-works contract is established, you should get the builder to agree that VAT will not be charged on works specifically for disability access.

A quick summary of the Listed Places of Worship guidelines is in order here, as I still get asked plenty of questions about the scheme, and find that there are church treasurers who have no experience in making claims.

The LPW Scheme makes weekly payments, and eligible claims with all the correct documentation are paid very quickly - even with queries, this is normally within 30 days.

Eligible works include repairs and alterations, including plumbing and electrical works, kitchens and lavatories, floors (not movable floor-coverings) and handrails, decoration, pews, asbestos removal, security and crime prevention, turret clocks, bells, pipe organs, and most of the professional fees associated with these eligible works, including the planning and design. It does not include things such as legal fees, fund-raising costs, faculty costs, and accountancy.

Claims have to be made withina year of the expenditure. Claims are normally against VAT on expenditure of more than £1000,but each year one claim from a church will be accepted at £500 or more.

Since all kinds of repair works to the church are eligible, it is worth sifting through the records of payments made and identifying invoices that together reach the target sum; £500 is not a high threshold, even for minor repairs. And keep up to date: consider VAT claims regularly, say every six months, to ensure that no claims are missed.

When more significant building works are under way, the process may be set up to make parallel payments to the professional team and the builder. Ensure first that the design-stage invoices are not left more than a year; but it can be much clearer what they relate to if they are submitted with the first contractor's invoice.

On building projects, it is normal for there to be a monthly site meeting between the builder, the professional design-team, and the client. It is also the time for the builder to value the work achieved since the last meeting. The architect produces a certificate agreeing the value of the work done, and the contractor issues an invoice. (Do not pay the contractor until the architect's certificate is in your hands.)

Pay the contractor, and check all fee invoices to date, and you can immediately make a claim to the Listed Places of Worship Grant Scheme. This reduces the negative cash-flow impact of having to pay out and then reclaim the VAT. Your funds will only ever be out of more than one month's VAT, even though the total VAT for the project is quite significant.

Ensure that you send the correct paperwork to the Scheme, together with the claim form, which is available at www.lpwscheme.org.uk.

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

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