The removal of the zero rate for alterations to listed buildings was one of the few aspects of the Budget that hadn’t been trailed in the press. While repairs on listed buildings have always been subject to full rate VAT, when the extent of the repair was so great, providing it been granted listed building consent and was neither deemed a repair or maintenance, previously it could be argued it qualified for zero-rate VAT.

The move to make alterations become taxable at the standard rate was unexpected, explains Karen Mulcahy of The VAT Consultancy (01962 735350; www.thevatconsultancy.com). ‘In reality the zero rate will only apply to works which amount to demolition and reconstruction from a shell. Listed places of worship will also be affected, and although the Listed Places of Worship refund scheme is to be extended for approved alterations subject to VAT at the standard rate, there is no indication that the funding for the scheme is to be extended.’

Philip Eddell of Savills Country House Consultancy (01635 277 709) says this is a ‘big deal for owners of listed buildings, as most will be privately owned,  reconstruction costs and materials tend to be more expensive, therefore restoration and improvement has always been proportionately more expensive.’

He continues: ‘At worst it will make listed buildings requiring extensive repair and improvement less attractive for private owners, which will ultimately affect capital values.’

Under the transitional arrangements, owners have already entered into binding contracts for alteration works prior to last Wednesday, will continue to benefit from the zero rate if carried out up to March 20, 2013. The Government has entered into a period of consultation which runs until May 4, 2012.