Documents to download

Construction work to repair buildings – be they homes, commercial structures or historic buildings, including churches – is liable to VAT at the standard rate. 

There has been a long-standing campaign to cut the rate of VAT on church repairs, although in the past governments have opposed this on the grounds that it would contravene EU VAT law – specifically, provisions for harmonising VAT rates across Member States.  In 2000 the UK made representation that the law should be changed, and the European Commission considered the proposal as part of a general review of reduced VAT rates which was completed in July 2003.  Prior to this, in December 2001 the Labour Government introduced the Listed Places of Worship Grant Scheme, to reduce the VAT cost on this type of work to 5 per cent.[1] In the event the European Commission did not recommend a lower VAT rate on church repairs,[2] and despite further lobbying, and some minor changes to the EU VAT rules, there is still no provision to allow a lower rate of VAT for church repairs.  In the 2004 Budget the scope of the Listed Places of Worship Grant Scheme was extended allowing churches to reclaim the full VAT cost on repair work.[3]  In 2010, as part of the Spending Review, the Coalition Government amended the rules of the scheme – restoring its original scope to reduce costs, and, from 2011/12, fixing its total budget in cash-terms.[4]

In Budget 2012 the then Chancellor George Osborne announced proposals to address a number of “loopholes and anomalies” in VAT. These amendments to the scope of VAT included removing the zero rate that applied to approved alteration work carried out on listed buildings.[5]  To mitigate the impact of this on church repairs, the Budget report indicated that the Listed Places of Worship Grant Scheme would be extended in light of this proposal,[6] and the Chancellor announced subsequently that this would consist of £30m extra in funding.[7]

Although the anticipated Exchequer impact of these changes was relatively small,[8] they proved highly contentious – with a highly publicised campaign to reverse changes to harmonise the VAT treatment of different categories hot takeaway food (the so-called ‘pasty tax’), as well as calls to retain the zero rate for alteration work on listed church buildings. At this time HM Revenue & Customs launched a short consultation exercise, asking for views of stakeholders affected by the changes, to identify any unintended consequences or unidentified impacts.[9]  On 28 June 2012 the Government published its response. As part of this, HMRC confirmed that the zero rate on approved alteration work would be scrapped, although in its assessment, the £30m in extra funding would cover the additional costs this would mean for listed places of worship. In addition transitional arrangements for alternation work that had been in progress at the time of the 2012 Budget would be made more generous.[10]  Subsequently in the 2014 Autumn Statement the Government announced a new £15m fund to support the maintenance of church roofs in 2015.[11]

In April 2016 the European Commission published its ‘VAT Action Plan’, including plans to modernise the EU legal framework for VAT rates.[12] The Commission published specific proposals to reform the EU rules on VAT rates in January 2018 – in effect, to reverse the current approach:

  • In addition to a standard VAT rate of minimum 15%, Member States would now be able to put in place:
    1. two separate reduced rates of between 5% and the standard rate chosen by the Member State;
    2. one exemption from VAT (or ‘zero rate’);
    3. one reduced rate set at between 0% and the reduced rates.
  • The current, complex list of goods and services to which reduced rates can be applied would be abolished and replaced by a new list of products (such as weapons, alcoholic beverages, gambling and tobacco) to which the standard rate of 15% or above would always be applied. To safeguard public revenues, Member States will also have to ensure that the weighted average VAT rate is at least 12%. The new regime also means that all goods currently enjoying rates different from the standard rate can continue to do so.[13]

There is no firm timetable for these proposals to be agreed, and there is considerable uncertainty as to their relevance for the UK, given the outcome of the EU referendum and the Government’s decision in March 2017 to trigger Article 50 – the two-year period for the UK to leave the EU.[14] To date the Government have published no specific details as to the UK’s post-Brexit relationship with the EU on VAT, beyond stating its ambition for an agreement on “common processes and procedures” to avoid the need for any new VAT-related border controls on goods moving between the UK and the EU.[15] It has also confirmed that, under the draft Withdrawal Agreement concluded in November 2018, the UK would remain compliant with EU law, including VAT law, during the ‘transition period’ prior to the implementation of the new, yet to be negotiated, UK-EU partnership arrangements.[16] In turn, this underpins the Government’s current position regarding the rate of VAT on church repairs:

Asked by Graham P Jones : To ask the Chancellor of the Exchequer, whether he has plans to remove VAT from services and items included for the repair and maintenance of (a) churches and (b) other religious buildings.

Answered by: Mel Stride : Under the current EU rules, the government cannot remove VAT on the repair and maintenance of places of worship. The government recognises the importance of places of worship in our communities and provides funding to cover the cost of repairs and maintenance of listed places of worship through The Listed Places of Worship Grant Scheme, managed by the Department for Digital, Culture, Media, and Sport.[17]


[1]    The scheme was first announced in the 2001 Budget (Budget 2001, HC 279 March 2001 p118).

[2]    COM(2003) 397 final, 23 July 2003

[3]    HC Deb 17 March 2004 c330

[4]    HC Deb 21 October 2010 cc59-70WS. Full details of the scheme are at:

[5]    HC Deb 21 March 2012 c801

[6]    Budget 2012, HC 1853 March 2012 para 2.179

[7]    HC Deb 17 May 2012 c731

[8]    The Budget report estimated that in total these changes would raise £270m by 2013/14 (Budget 2012, HC 1853 March 2012 p50; Table 2.1 – items 27 & 28)

[9]    HMRC, VAT: Addressing borderline anomalies, March 2012.  The deadline for responses was 18 May.

[10]   HMRC, VAT: Addressing borderline anomalies – summary of responses, 28 June 2012 pp22-27

[11]   Autumn Statement, Cm8961, December 2014 para 2.252

[12]   European Commission press notice, VAT Action Plan: Commission presents measures to modernise VAT in the EU, 7 April 2016

[13]   European Commission press notice, VAT: More flexibility on VAT rates, less red tape for small businesses, 18 January 2018. The draft proposal is COM(2018) 20 final. Full details are on the Commission’s site.

[14]   For details see, Brexit timeline: events leading to the UK’s exit from the European Union, Commons Briefing paper CBP7960, 7 November 2018.

[15]   HM Government, The future relationship between the UK and the EU, Cm 9593, July 2018 p18

[16]   Letter from the Financial Secretary to the European Scrutiny Committee, “EU legislative proposals on VAT”, 5 December 2018; and, European Scrutiny Committee, Forty-ninth report of 2017-19, HC 301 xlviii, 24 December 2018 (specifically, “6: VAT: exemptions for small businesses” pp48-56).

[17]   PQ190861, 18 November 2018

Documents to download

Related posts