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VAT and Listed Buildings (2) - Defining Alterations for Zero VAT Rating Purposes
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By Zaenia Rogers

When is an ‘alteration’ really an ‘alteration’ for zero rating to apply to listed properties?
In order to achieve zero rating on ‘approved alterations’ it is important to understand what is actually regarded as an ‘alteration’, both from HMRC’s perspective and from the many Tribunal decisions taken on the matter. Clearly the work must first be approved, and this is shown by having the correct listed planning permission in place, something we touched on in the previous article and may delve into later in the series.
However, for now we will concentrate on simply the word ‘alteration’, and although in a short article such as this it would be impossible to discuss every specific agreed case, it is certainly possible to examine the established basic principles. The pointers given below therefore guide you towards forming a decision and gaining an understanding when reviewing any schedule of works:
- The opposite of an alteration will be repair/maintenance work which will be standard rated for VAT purposes irrespective of the type of property (subject to any other VAT rates applying to the project – see previous article regarding the reduced rate on conversions or empty properties)

- An alteration therefore is regarded as something undertaken to the fabric of the building which is more than ‘trifling or insignificant’. According to HMRC’s own internal guidance, the fabric of a building “comprises the elements that characterise the structure as a building, such as walls, roofs, internal surfaces, floors, stairs and landings and all doors and windows. The fabric of the building also includes plumbing and central heating systems, and mains wiring and lighting systems.”

- Current case law has further clarified HMRC’s contention that work must be to the fabric of the building with confirmation that the following would not constitute an ‘alteration’ for VAT purposes (irrespective of whether they are detailed in the listed planning consent); Paving, landscaping and works to terraces and walls which merely abut the building and works to plumbing systems outside of the building. This is far from an exhaustive list but provides you with confirmation that the courts certainly agree with the ‘fabric of the building’ notion

- It is also worth noting that the cost of the work is also irrelevant; just because something costs a significant amount does not mean the works will qualify as a zero rated alteration

- Examples of what HMRC do and do not accept as alterations may be found listed in their Public Notice 708, section 9.3.2 which is readily available on their website. The list includes the following:
  • Creating an opening for a door or window where none previously existed, or indeed blocking up an existing opening will qualify as an alteration. However, replacing windows or doors for newer models will be deemed a repair/maintenance;
  • Replacing the material on a roof to a modern equivalent will be deemed repair or maintenance work, but changing the pitch of a roof will be deemed an alteration.

- The final point to note about any alteration, is that any ‘building materials’ supplied in connection with an approved alteration may also be zero rated. However, it is goes even further than that. It is not always just the alteration itself that may qualify, but preparation works and making good an area as a result of an alteration may also qualify.

Overall, readers will no doubt note that, perhaps going against the notion of protecting and maintaining a listed property, significant changes will generally attract the zero rate of VAT.
ProjectBook members articles are published on the Country Life website each week.

“VAT and alterations to listed buildings" was originally published on 30th July 2010 in Country Life’s online Property Blog.


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