The following material has been prepared for general information purposes only. It does not constitute specific advice and is not intended to be relied upon as accounting, tax, legal or other professional advice.
Tax rules can change and you are recommended to check with HMRC for the most up-to-date information. You should not act upon this information without obtaining specific advice from a suitably qualified professional advisor. No representation or warranty (express or implied) is given as to the accuracy or completeness of this information and, to the extent permitted by law, Historic Environment Scotland does not accept any liability, responsibility or duty of care for any consequences of anyone acting in reliance on it.
VAT and listed buildings
In theory, VAT is straightforward: almost all supplies of goods and services by businesses are subject to a standard-rate tax (currently set at 20%) and VAT incurred on expenditure by businesses is recoverable. In reality, the system can be extremely complex and this is the case for VAT and construction work.
We’ve put together this page to help you navigate those complexities as there are areas where VAT is charged at a zero rate or a reduced rate (currently 5%) or not at all (exempt or outside the scope), which aren’t widely known and can apply to listed (and unlisted) buildings.
If you are looking to apply any of the situations below, you should not act on the commentary below without engaging with a specialist VAT consultant to help you understand your specific circumstances and help you to make the most of any reductions or exemptions.
HM Revenue and Customs (‘HMRC’) provide guidance online but any specific written advice from HMRC would normally be sought by the supplier of the services, not the customer receiving them.
In summary most repair, renovation and improvement work to existing buildings is subject to VAT at the standard rate (20%), with certain exceptions. Construction of some new dwellings is zero-rated. Historically, until 2012, VAT on ‘approved alterations’ to listed buildings were zero-rated. However, since 2012 such works are subject to VAT at the standard rate (20%). For listed places of worship there is a grant scheme managed by the Department for Culture, Media and Sport which can provide funding for VAT incurred on certain repairs of over £1,000.
There are three positive rates VAT rates – standard (20%), reduced (5%) and zero-rated (0%). In addition, services may also be exempt or outside the scope of VAT. These five different VAT treatments can all apply to property sales and construction services, depending on the nature of the supply.
We have summarised the main VAT treatments below but there can always be exceptions and this list is not definitive, so as mentioned above you should not act on the below without seeking your own professional advice.
Standard rate of VAT (20%) applies to:
- Construction of new commercial buildings.
- Sale of new (three years or fewer after completion) commercial property.
- Repairs, maintenance, alteration, and extension to existing residential property, that is currently being used for residential purposes.
- Repairs and maintenance to existing commercial property.
- Supply of holiday accommodation.
- Supply of professional services associated with development of property, even where the property being developed is zero-rated, reduced rated or exempt.
Reduced rate of VAT (5%) applies to:
- Conversion of a non-dwelling into a dwelling.
- Change on the number of existing dwellings: for example, two dwellings into one dwelling or vice versa.
- Refurbishment or alteration of empty dwellings that have been empty for two years or more.
- Installation (and associated supply) of certain mobility aids for people aged over 60 (certification may be required)
Zero-rate of VAT (0%) applies to:
- Construction of a new dwelling or dwellings.
- First sale of a ‘major interest’ (freehold or long leasehold) in a new residential property by the person constructing.
- First sale of a ‘major interest’ (freehold or long leasehold) in a commercial property newly converted into dwellings by the person constructing.
- First sale of a ‘major interest’ (freehold or long leasehold) in a protected (i.e., listed or scheduled) building substantially reconstructed from the shell by the person constructing.
- Construction or sale of a new building that is intended to be use for a Relevant Residential Purpose (RRP) – this includes various types of special residential accommodation, generally institutional, such as children’s and care homes, boarding accommodation for schoolchildren, armed forces housing, monasteries, and nunneries.
- Construction or sale of a new building that is intended to be use for a Relevant Charitable Purpose (RCP) – this does not include an office for administering the charity but can include an annexe of a building with a separate entrance and capable of being used independently.
- Supply of certain construction services to existing buildings for improving accessibility and useability for registered disabled people, including:
- installing a ramp or widening an existing doorway or passageway in a disabled person’s own home or any building owned by a charity.
- Providing, extending, or adapting a bathroom, washroom or lavatory to suit the condition of a disabled person in that person’s own home, or for charity’s residential accommodation or a day centre where at least one-fifth of the individuals using the centre are disabled persons.
- Providing, extending, or adapting a washroom or lavatory (but not a bathroom) for use by a disabled person in a building used principally by a charity for a Relevant Charitable Purpose.
- Installing or maintaining a lift for use by a disabled person in their own home or in a day centre or temporary or permanent residence for disabled people (but not in other types of charity building).The supply of chair or stair lifts and lifts in charity buildings where they are designed for use by disabled people and where the lifts have been installed to meet the needs of specified disabled people.
- Supply and repair and maintenance of a qualifying emergency alarm call system.
Special schemes
- DIY Housebuilders Scheme: DIY housebuilder can recover the VAT on certain construction goods and services for the construction of a new home or the conversion of an existing non-residential building into a home.
Contractors turning over less than £85,000 a year
- Businesses turning over less than £85,000 a year are not required to register for VAT. This means that they do not have to add VAT to their invoices.
VAT and the circular economy – the margin scheme
- Dealers in architectural salvage and second-hand building materials may choose to apply the margin scheme on all or some of their sales (paying 16.67% on the difference between cost and sale price rather than standard rate VAT on their sale price, while not being able to recover input VAT on items purchased for stock through the scheme).
Please see our VAT on Listed Buildings Report for more background and information about VAT.
VAT on Listed Buildings ReportAdditionally, further information can be found on HMRC’s website and in the following VAT Notices:
- 708 - Buildings and Construction
- 708/6 - Energy-saving Materials and Heating Equipment
- 709/3 - Hotels and Holiday Accommodation
- 701/7 - Reliefs from VAT for Disabled and Older People
HMRC update its guidance regularly. All information above was correct as of November 2023.