Local churches hit by VAT hike

This letter is another example of a local church that is likely to be hit by the proposed VAT on listed building alterations. See my website here http://www.marklazarowicz.org.uk/mark-warns-of-impact-on-edinburghs-heritage-of-budget-vat-tax-hi for more details. The UK government won the vote on the issue in the budget debate recently, but they have suggested they will increase funding to the UK wide 'Listed Places of Worship' scheme to help churches (and other buildings used by faiths) pay the extra VAT. There's real concern, however, that any such increase won't be enough, and I've written about this to the Treasury Minister.

Dear Mr Lazarowicz



I refer to your letter of 1st May 2012 ....which has been passed to myself for attention.



The congregation of Charlotte Chapel, an independent Baptist church, recently took the decision to seek a relocation from our existing Church building in Rose Street, Edinburgh, because it was not large enough for our current congregational use, and after undertaking a search for suitable alternative premises we decided to progress the purchase of the St. George’s West Church building at 58 Shandwick Place, Edinburgh, where the congregation has recently merged with another Church of Scotland congregation, St. Andrew’s in George Street, Edinburgh. These negotiations are now well advanced through the respective solicitors and we hope to conclude missives for a purchase by the end of next month. The Shandwick Place building is a Grade A listed building in a prominent position in the centre of Edinburgh and it is hoped to carry out extensive alterations and refurbishment to not only make it suitable for our purposes but also to protect and enhance a very important building on the Edinburgh skyline.


The funding for the purchase of the Shandwick Place building (which is substantial) is being raised solely from the existing congregation with no external debt finance and the cost of the proposed alterations and refurbishment is being financed by a combination of our existing capital reserves and the proceeds from the sale of our existing premises. Detailed plans have been drawn up and the design concept and space planning proposals have now been accepted by the congregation and costs are being obtained for the implementation of these proposals. The cost plans have been adjusted to ensure that they come within the funding parameters set out above and such parameters must include all costs which are likely to be incurred, including fees and VAT. Taking a prudent approach, the impact of the Government’s proposal to introduce VAT at 20% on alterations to listed buildings must be incorporated into our cost plans but this means that we are facing a VAT bill of over £300,000 for the proposed works to the Shandwick Place building.



Because we have a cost ceiling which could not be increased without either raising more money from the congregation or obtaining more money from the sale of our premises (both difficult and possibly unachievable in the current economic climate), the additional VAT bill we are facing has resulted in us scaling back the extent of the works to adapt and protect the existing building and will mean that some works to preserve and enhance both the internal and the external appearance of the building have had to be dropped completely. Consideration has been given to seeking finance from the Listed Places of Worship scheme but this is not only vastly underfunded but also a very cumbersome process which will incur more fees for us as the supervising body will not accept our consultants and require the involvement of recommended specialist architects. Also, using this scheme does not remove the anomaly between repairs and maintenance or alterations and it has even more complicated rules and regulations which means that, even if it was fully funded, it is unlikely that we would be reimbursed the additional VAT on alterations.



The Budget proposal will have an adverse effect on our current proposals, especially as we are completely self-financing with a funding limit which cannot be immediately or easily increased (if at all) and will have an impact on the preservation of an important listed Church building in the centre of Edinburgh. Any help you can give as our Member of Parliament to raise this issue and try to get it withdrawn would be much appreciated.




Yours sincerely




David Clement






Property Convener Deacon