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VAT on a new parish room

04 July 2014

We are demolishing our old parish room to rebuild a newer one for a number of reasons, one of which is to provide disabled access to the hall, and to the only lavatories on our site. It is, and will remain, a completely independent building - albeit five feet away from the church, which qualifies under the Listed Places of Worship (LPW) grant scheme. Am I right in assuming that the whole of the new building will qualify for VAT zero-rating anyway, and we should not expect to claim through the LPW grant scheme? But would the design work, architect's fees, etc., regarding the new building also qualify for zero-rating?

THE subject of VAT keeps coming round. New buildings, in general, are zero-rated for VAT. Double- check with your architect/project manager about how the zero-rating will be handled, as it is a question of the contractor's not including VAT on the invoices.

Before the contractor gets under way, there will be an exchange of letters assuring the contractor, who does not want to fail a later inspection by the VAT person, that he or she is doing the right thing in not charging VAT. You get your zero-rating only if it does not get invoiced. Clear up this process early on, as you have no right to claim back any VAT paid in error.

The architect's fees, and those of others on the design team, are not zero-rated on new buildings; so you will be charged VAT, and cannot reclaim it through the LPW grant scheme. This is important to your budget for fund-raising.

Disabled facilities are also zero-rated in old or new buildings; so, when congregations are preparing to install lavatories in the church, those elements that are accessible to the disabled, including items such as ramps, are zero-rated, and will need to be identified before the works begin (as above), and the contractor will not charge VAT on those elements of work. The balance of any work inside the church then comes under the usual parameters of the LPW grant scheme.

When you are fund-raising, it is best to include the VAT in all your indicative and draft budgets under expenditure, and show the appropriate amount under income, alongside other grants. This gives you an idea of what you are going to have to pay out, even though you will get it back in due course.

When you apply for your VAT reclaim, more information is needed now than used to be the case, anda works budget should be supplied, together with more breakdown on what each invoice covers, to ensure that all elements are eligible under the scheme.

As with grant schemes such as the Heritage Lottery Fund and Landfill Community Funds, collecting the extra details requested is arduous, but they are probably required by auditors.

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

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