Do opportunities exist for almshouse charities to gain exemption from VAT on certain costs?
Although the withdrawal of zero-rating for listed building works in 2012 resulted in fewer VAT saving areas, the good news is there are a number of opportunities where Almshouses can reduce their VAT costs, provided they are aware of when the zero-rating and reduced rate of VAT applies.
The following building works are likely to be zero-rated for VAT purposes:
- The installation of wet rooms or bathrooms for disabled residents
- The widening of corridors or doorways in Almshouse properties
- The construction of ramps
- The widening of a pathway across the Almshouse grounds
- The installation of a vertical lift, chair lift or stair lift
- The installation of a warden call system
If any charities have incurred VAT on any of the above expenditure within the last four years, it is possible to approach the supplier, providing they are still in business, and seek a refund of the VAT charged.
Zero-rating can also apply to expenditure which is closely connected with the above works such as repairs, refurbishment or servicing to the lifts, warden call system and works to almshouse bathrooms.
Should any charities change the number of units within their properties, perhaps by reducing the number of flats within a building, the associated building works could well qualify for the reduced rate of 5% VAT.
If an almshouse charity has any property which has been empty for over two years and decides to refurbish the property, the VAT rate applicable to the work will again be at the reduced rate of 5%, quite a considerable saving.
The reduced rate of VAT can also apply to a number of energy saving costs, but unfortunately the legislation is much more complicated. The energy saving materials that may qualify for the reduced rate of VAT of 5% when installed by a building contractor are:
- The insulation for walls, floors, ceilings, roofs, lofts, water tanks, pipes and other plumbing fittings;
- Draught stripping for windows and doors;
- Central heating system controls, including thermostatic radiator valves;
- Hot water system controls; and
- Solar panels
Should an almshouse charity receive a grant for the installation of certain heating equipment, the reduced rate of 5% will apply to the extent that the supply is grant-funded. The type of expenditure covered is as follows:
- Closed solid fuel fire cassettes;
- Electric dual immersion water heaters with factory-insulated hot water tanks;
- Electric storage heaters;
- Gas fired boilers;
- Gas room heaters with thermostatic controls;
- Oil-fired boilers; and
- Radiators
- Central heating systems
- Renewable source heating systems
The irony here is the reduced rate only applies to the grant funded portion of the works and should the charity use its own funds the work will attract the standard 20% rate of VAT.
Advertising by charities is zero-rated and covers all forms of adverts including newspapers, magazines, radio and television.
Finally, it is worth mentioning that for all almshouse charities’ residential accommodation, the reduced rate of 5% applies to supplies of electricity, gas and oil used for heating and lighting.
The aim of this article is to provide charity Trustees and staff with information to assist with reviewing past expenditure which may qualify for the reduced rate or zero-rate of VAT. If it is found the standard rate of VAT has been charged to the almshouse charity on any of the areas outlined above, an opportunity may be available to seek a retrospective refund of VAT.
Charities VAT Services offer a free VAT help-line for members of the Almshouse Association. Therefore if you require confirmation on whether VAT reliefs exist in connection with any of the expenditure areas highlighted above, please do not hesitate to contact us.
Glenn Havenhand, Lorraine Kimpton – Charities VAT Services. Member of the Panel of Consultants of the Almshouse Association. Tel: 01709 709727. Email: glenn.havenhand3@btopenworld.com