Dear Mr Osborne,
I write to you as the Director & Founder of the Listed Property Owners Club (LPOC) to feed in some of our priorities ahead of the forthcoming Autumn Statement. Over the past two years Listed Property Owners have had to deal with rising costs in order to maintain their property to required legal standards. This has been due in part to the raising of VAT on approved alternations to buildings from 0% to 20% at the 2012 budget. While this did remove an anomaly whereby alterations were zero-rated but repair and maintenance were standard-rated it has also imposed a large cost burden for listed property owners and reduced the number of listed building consent applications. We have noted a significant reduction in the number of listed building consent applications for approved work in 73 councils across England for from 14,605 in 2011 to 10,325 in 2013; and believe this trend is likely to be replicated across the country.
The rationale given by this Government to scrap zero rated VAT on alterations was that it would stop wealthy owners building on their properties VAT free. On the 14th April 2012 Financial Secretary to the Treasury, Mark Hoban argued that the policy would ‘close a loophole that allowed millionaires to build tax free swimming pools’. After an FOI request it was found that this assertion was based on a study of just 105 applications for listed building consent. LPOC which receives and has access to a large majority of listed building consent applications studied 12,049 of them prior to the 2012 budget. We found that there were only 34 references made to swimming pools, of which less than half may have qualified for VAT relief.
I want to put on the record that the large majority of listed property owners are of modest means and aren’t wealthy people. 50% of owners in the lowest socio-economic groups C1, C2, D and E; and would certainly not be able to afford a swimming pool regardless of tax relief.
The feedback we have had from owners on the impact of this policy change is that some are now unable to afford to make alterations to their buildings and are being forced move out of their properties which places our heritage at risk. While some of these properties are sold others lie in state of disrepair, sometimes for several years. There are now 1,115 listed buildings at risk on the English heritage at risk register and many more which are unrecorded. These buildings recorded a ‘conservation deficit’ (funding gap between the cost of repairs and end value of building) of £443 million in 2014.
Secondly it is the opinion of LPOC that owners are undertaking unauthorised work to avoid paying VAT on alterations. This represents a significant risk as unscrupulous builders may not have the necessary heritage expertise or experience to work on listed buildings. Furthermore as you will appreciate the Treasury would forgo any VAT receipts if alterations are carried out outside of the consent regime.
Thirdly the structure of the policy means that substantial reconstructions of listed buildings if they are being rebuilt ‘from a shell’, retain VAT rate relief. Although the precise meaning of ‘shell’ appears not to have yet been defined in the courts, there is a significant risk of deliberate and unauthorised alteration of listed buildings by removal of historic fabric to reduce substantial buildings to a shell purely for tax purposes.
Considering the impact of these changes I would like to ask you to consider how, in your final Autumn Statement of this Parliament, you might assist listed property owners in order to preserve our proud listed building heritage.
LPOC understands the UK has been through the worst recession in modern times and budgets are tightening at unprecedented levels. Furthermore we are acutely aware of the tough decisions that the Government has had to take in this Parliament in order to preserve our long term economic future. We do feel though the VAT change in 2012 affected over one million people who own listed properties, there is a case for Treasury to provide financial incentives to listed property owners as they currently receive no such assistance.
Thus LPOC calls on the Government to reconsider its decision to remove VAT relief on alterations and to consider a reduction of VAT on approved listed building alterations to 5%. This position is supported by the wider heritage sector and campaigns such as Cut the VAT campaign, Heritage Alliance and Institute of Historic Building Conservation. The reduction on dwellings in private ownership is permitted under EU rules excluding materials which account for a significant part of the value of the service supplied which is permitted under [European Union Directive 2009/47/EC amendment] Annex III of the VAT Directive 2006/112/EC.
In 2016-2017 the Treasury’s calculated this policy would bring in revenue of £125 million, but a reduction to a VAT rate of 5% on approved alterations to listed buildings in private dwellings would bring in significantly more than this figure over the long term. A reduction to 5% would increase the number of listed building consent applications, as well creating jobs and work for the construction industry who work on listed buildings. It would also boost the heritage sector of the tourism industry which now worth £26.4billion to the UK economy according to recent research by the Heritage Lottery Fund.
Comparisons with other European nations
Despite under this Government the UK having one of the lowest corporate tax rates in Europe, we have one of the highest VAT rates charged on renovation works in historic homes across Europe.
- UK: 20%
- Belgium: 6%
- France: 7%
- Germany: 19%
- Greece: 18%
- Ireland: 12.5%
- Italy: 10%
- Netherlands: 6%
- Portugal: 6%
- Spain: 8%
- Switzerland: 7.5%
(European Historic Houses, Activity Report 2012–2013)
A cut in VAT on housing renovation across all housing would bring substantial benefits over the life-time of the next parliament (2015-20), by providing a huge stimulus of more than £15 billion to the economy (Experian, 2014) at a loss to the Treasury over the same period of approximately £6.29 billion (Experian, 2009). A targeted VAT reduction would boost economic growth, increased employment, greener homes, cost of living, and ensure there were fewer cowboy builders.
The Listed Property Owner’s Club is Britain’s only member organisation providing a dedicated support service for the UK’s listed property owners who are custodians of approximately half a million listed properties, all of which are subject to strict regulations on planning, alterations and maintenance. The owners of listed property have an obligation to maintain these national assets and do an incredible job in ensuring their preservation for future generations. Once our listed building heritage is lost, it is lost forever. We hope that you will consider these proposals closely in the drafting our Autumn Statement. I do hope that going forward we can work together to support our listed property owners and I would like to take this opportunity to thank ministers across departments who have been engaged constructively on this issue.
Yours sincerely,
Peter Anslow Esq, Director
