Policy regarding Value Added Tax (VAT) on historic buildings
RN 2014/1, May 2014
This is one of a series of occasional IHBC Research Notes published by The Institute of Historic Building Conservation (IHBC). IHBC Research Notes offer current and recent research into topics that we consider crucial to the promotion of good built and historic environment conservation policy and practice. The Notes necessarily reflect knowledge and practice at the time they were developed, while the IHBC always welcomes new case examples, feedback and comment to firstname.lastname@example.org for future revisions and updates.
Executive Summary This Note examines the history, implications and current complexities of the application of VAT on historic buildings.
VAT introduced in 1973 and payable on repairs to all buildings has been a tax disincentive to the appropriate repair and timely maintenance of historic building and encouraged alteration (zero rated) at the expense of retaining historic fabric.
The additional imposition VAT at the full rate on alterations in 2012 has placed a significant additional burden on owners of listed buildings who were already acting in the national interest as involuntary custodians of heritage.
VAT on both repairs
and alterations diminishes the economic viability of heritage projects particularly cases of Heritage-at-Risk, which are a priority of government heritage policy to resolve.
VAT on both repairs
and alterations has a suppressive effect on economic activity and has resulted in consequential loss of capacity especially among specialist, SMEs essential for the appropriate care of historic buildings and has a deleterious impact on initiatives to revive or promote enterprise, craft skills and apprenticeships.
The Government’s stated protestations that the commonality European Union taxation policies is a constraint from the application of varying rates of VAT is not supported by EU documentation.
Concessions made by the Government for churches through the Listed Places of Worship Scheme comprised grants to offset VAT rather than the introduction of a concessionary rate.
The current levels of VAT raise £600M annually but a reduction in VAT from 20% to 5% on housing repairs and maintenance is calculated would result (for the period 2015-2020) in a £15Bn boost to the economy, the creation of 95,000 new jobs and a carbon reduction of 240,000 tonnes of CO2 from thousands of homes.
The reduction in the current level of VAT on repairs and general maintenance and alterations to historic buildings would be more than offset by a significant boost in economic activity providing a valuable stimulus to the economy in terms of employment, skills, National Insurance etc, and boost spending by contractors, manufacturers and suppliers in the economy at local level.
1. One of the most contentious aspects of managing and repairing historic buildings is the tax burden on owners and is an issue that has led to prolonged lobbying of the government by the heritage sector. Although Value Added Tax (VAT) was levied on repairs for many years, the decision by the government to tax alterations to listed buildings at 20% in 2012 while also removing a number of 'loopholes and anomalies' in the coverage of VAT proved controversial. The Treasury received nearly 1,500 responses (on the overall changes) to the consultation and profound concern about the impact was expressed within the heritage sector (and indeed outside), which persists. The IHBC’s stance on this issue is set out in Section 7.
2. VAT was introduced on 1 April 1973 and has been payable on repairs to all buildings since. As a tax on consumption, VAT is the third largest source of government revenue after income tax and National Insurance. The taxation introduced by the VAT Act 1994, regulated approved alterations to a listed building as zero-rated .
3. The Government’s policy position is that UK VAT law is based on European VAT law and it has limited discretion in amending the national VAT structure and rates. Further, it argues that under harmonization agreements for rates of VAT reached in October 1992 the UK cannot introduce any new zero rates of VAT but can continue charging any lower rates, including zero rates, which were in place on 1 January 1991.
a. Additionally there is discretion to charge a reduced rate of VAT - between 5% and 15% - on a specified list of goods and services, one of which is the ‘provision, construction, renovation and alteration of housing, as part of a social policy.’ Consequently, the Government has stated that while it may charge a reduced rate of VAT on repair work for social housing, it cannot do so for historic buildings or churches .
b. In October 1999 the EU agreed to amend VAT rules to give Member States the option, should they wish, to apply a reduced rate to certain ‘labour-intensive services’, to reduce unemployment. Included was the ‘renovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply.’ A number of countries took the opportunity to reduce the VAT rate on this supply - but not the UK, notwithstanding the fact that repairs to listed buildings could have been covered by this provision, provided that they were dwellings.
c. Until 2012 if a building was listed, it might not have been necessary to pay the tax on approved alterations, however, in the 2012 Budget the government announced that VAT would be charged at 20% on all works of repair and alteration to listed buildings. Transitional arrangements were put in place to protect the tax rate applied to contracts entered into before 21 March 2012 but those contracts had to be completed by 30 September 2015
d. If a listed building had never been previously used as a dwelling but was to become one following the work, or if it was already a dwelling but has not been lived in for two years prior to the works commencing, a lower VAT rate of 5% was to be applied.
e. The level of taxation affected by the proposals relating to alterations to listed buildings was estimated to be about £600 million based on data is taken from the Department for Communities and Local Government and local authority planning applications. About one fifth of this was estimated would become subject to the 5 percent reduced rate of VAT for residential conversions
f. A matter of great concern to IHBC is the adverse impact of VAT on Heritage-at-Risk (a Department of Culture Media and Sport (DCMS) and English Heritage priority). The VAT levied on this work significant impedes the viability of projects necessary to save them for future generations to enjoy. Timely repair demonstrates good conservation management and obviates the need for damaging and substantial reconstruction that inevitably follows from prolonged neglect and is the point when much of the special architectural and historic interest will be needlessly lost.
g. A related concern is that VAT policy still retains the zero tax rate for substantial reconstructions of listed buildings if being rebuilt ‘from a shell’. 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
4. The stated position of Her Majesty’s Revenue and Customs (HMRC) is that:
‘The repair and maintenance of a protected building is standard-rated, but the approved alteration of a protected building is zero-rated. Some alterations restore or enhance the unique character of a building or prolong its active life, but most work covered by the relief is extension work, which is unnecessary for heritage purposes. Alteration work on other types of building is standard-rated so owners of listed buildings receive a tax advantage over owners of other types of building.’
5. This position ignores the principle that for historic buildings to continue to be fit for purpose, they must be capable of adaptation to appropriate and beneficial uses where repairs and alterations are often necessary and proceed hand-in-hand and should not be the subject of a taxation burden above and beyond the regulatory regime which applies through Listing.
6. As VAT is imposed at a fixed rate on the price of goods and services, it is commonly accepted that the tax is regressive, that is the burden of the tax lies more heavily on those with lower incomes, as the amount of tax paid is not based in any way on that person’s ability to pay. Arguably this is an over-simplification in two respects: that a person’s expenditure is, in fact, a measure of their ability to pay and that in this country, the tax base is such that VAT is not levied on a relatively large part of poorer households’ budgets (for example, the zero-rating of food)
7. Although a concession was made regarding churches through a grant scheme for Listed Places of Worship (see Section 5 below), offering some return where VAT has been paid it is unlikely to cover 100% of the VAT cost in most cases.
Promotion of the arguments
8. Since the introduction of VAT on historic building work, there has been lobbying on the issue but in 1999, a consortium of organisations led by the Joint Committee of the Amenity Societies commissioned Jeremy Eckstein Associates to report on the impact of VAT on listed building repairs and this was the subject of an article by John Sell in the IHBC’s member journal Context.
9. In December 2000 the Power of Place report coordinated by English Heritage proposed harmonizing 5% VAT rate on all building work, and other detailed and costed reports have been undertaken subsequently including one by the New Economics Foundation for the Princes Regeneration Trust in 2007
10. In July 2007 the RICS published research report assisted by the RICS Education Trust, which explored: income tax deductions and credits for the costs incurred in heritage work; income tax credits for the provision of social housing in heritage buildings; property tax exemptions, abatements or freezes for heritage buildings; VAT concessions or rebates relating to conservation; taxation encouraging philanthropy through the establishment of heritage charities; and inheritance, gift and capital gains tax exemptions and concessions.
11. The RICS report concluded that taxation policies have a key role to play in heritage management, providing incentives to owner-occupiers, investors and developers without requiring government expenditure, very much chiming-in with contemporary ideas about the size and role of the state.
12. An informative House of Commons Library Standard Note also sets out the efforts by MPs in the House of Commons on a number of occasions to raise the issue in relation to historic buildings without any perceptible impact on Government VAT policy.
13. Long-standing disquiet about the impact of VAT on repairs to historic buildings, and campaigning for the percentage tax rate to be reduced or the works zero-rated has been superseded since 2012 by a greater, pervasive concern. This is that the Government, presented with the opportunity to offer assistance to historic building owners though the mechanism of a cut to the tax on repairs, has done precisely the opposite by ‘equalising’ the tax position – effectively levying the same full rate of tax on all listed building works, both repair and alterations at the 20% rate.
14. The Scottish Government in 2008 made some interesting observations on the sustainability benefits of equalisation of VAT at a lower level i.e. not necessarily following the main thrust of the arguments being advanced in England but equally valid. For example, equalisation would be likely to reduce the additional use of energy necessary to demolish existing buildings and construct new ones, not to mention the embodied energy in existing homes. A reduced rate of VAT would also be beneficial in improving energy efficiency and meeting emission targets.
15. Other advantages of reducing the rate of VAT cited in Scotland included: help in bringing empty homes back into use; addressing the problem of sub-standard housing by encourage those (particularly on low-incomes) to improve their homes; encouraging regeneration - through development on brownfield land; and reducing the number of rogue builders - given that reducing the rate on renovations would lessen the commercial advantage that tax-avoiding builders would have.
16. More recently as a continuing expression of concern about the impact of VAT on heritage in Scotland, the Scottish Independence White Paper stated that:
‘With independence Scotland will have new powers over the economy to encourage our culture and creative sectors. For example, with new powers over taxation, we can explore a VAT reduction on repairs and maintenance work.’
‘The Listed Places of Worship Scheme, which is administered by the Department of Culture, Media and Sport, provides grants in respect of VAT costs incurred for eligible repairs, maintenance and alterations to places of worship across the UK. The current Scottish Government proposes that a similar scheme should operate in an independent Scotland, and will consider extending the scheme to benefit the repair and maintenance of all listed buildings’.
17. It was also stated that: ‘Independence will enable the Scottish Parliament to explore a reduction in VAT on repairs and maintenance work to homes as part of wider taxation priorities’. This gives a clear indication of an intended policy direction on VAT and building condition and maintenance and including recognition of the historic buildings dimension.
18. A concerted and sustained campaign by IHBC, the Heritage Alliance, SPAB and the RIBA; construction organisations such as the Federation of Master Builders, owner organisations including the Country Land and Business Association; the Historic Houses Association (HHA), and the Historic Towns Forum, the Countryside Alliance and the Cut-the-VAT Campaign Coalition, have all called on the government to reverse the 2012, decision without success. All these organisations have serious reservations about the revenue likely to be raised in relation to the disincentives for owners to properly manage and appropriately alter their properties and the significant fiscal, economic and sustainability benefits a cut would bring.
19. Although organisations representing the professions, the third sector, construction and owners of large country houses (many of which are also businesses) all expressed deep concerns, the Institute notes that there is no constituency either within the sector or more widely, to articulate the anxieties of the majority of individual residential property owners of listed buildings who are struggling to meet their statutory obligations regarding repair and maintenance.
20. While it might be argued that VAT-able alterations on individual properties would be levied only infrequently or as a one-off; this additional taxation by the Government on top of the onerous imposition of VAT on repairs is a cost that cannot be offset by for example commercial or charitable income or grants and is therefore a potentially significant personal financial burden.
21. The heritage sector has consistently lobbied on VAT, firstly for the reduction of VAT on repairs, and since 2012 for the reduction or relief from VAT on approved alterations to listed buildings. If this were achieved it would rationalise VAT in ways that would benefit jobs, the environment and the economy by encouraging essential maintenance and enhancement of historic buildings. Furthermore it would be a stimulus to the very large proportion of the parts of construction industry involved with refurbishment and by a stimulus to skilled employment. Failure to address this taxation anomaly may represent a significant missed opportunity by the Treasury.
22. In March 2014, the Cut the VAT Campaign Coalition published ‘Am estimate of the effects of a reduction in the rate of VAT on housing renovation and repair work: 2015 to 2020’, independent detailed research undertaken by Experian and co-funded by IHBC, the Federation of Master Builders, the Glass and Glazing Federation and the National Federation of Roofing Contractors. This research countered the anecdotal evidence issued intermittently by HMRC about the supposed impact of VAT and the problems associated with a reduction.
23. The Experian Report demonstrates that a targeted reduction in VAT from 20% to 5% over the period 2015 to 2020 could provide a huge economic stimulus of more than £15.1Bn, create 42,050 extra full-time equivalent construction jobs and an additional 53,430 jobs in the wider economy, i.e. 95,480 extra jobs in the UK with up to 3,586 new construction jobs coming in Scotland; 1,475 in Wales and 416 in Northern Ireland.
24. In addition to jobs and growth, single cut in VAT on housing renovation and repair work could generate £1.008Bn on energy efficiency measures and help almost 91,700 homes benefit from retrofitting over the five years to 2020, helping to alleviate fuel poverty and reduce the cost of living but also help progress towards the UK’s legally binding carbon reduction targets by reducing the emissions from our existing housing stock. There would be a potential saving of up to 237,128 tonnes of CO2 as these homes are retrofitted with loft and wall insulation, double glazing and energy efficient boilers.
25. Although these benefits would lead to a cumulative net loss of £6.6bn to the Treasury over five years, in 2015 alone the economic stimulus would create 31,950 extra full-time equivalent construction jobs; an additional 39,140 jobs in the wider economy; extra expenditure of around £145m on energy efficiency and potential saving of up to 36,358 tonnes of CO2. Critically, net losses to the Treasury of £921m might be expected once the revenue gains and losses from lower unemployment benefits, higher income tax and National Insurance are taken into account.
Loss of specialist construction capacity
26. At the time of the change to VAT in 2012 HMRC stated that businesses and charities owning protected buildings would be affected if they could not reclaim the additional VAT incurred. It estimated that 35,000 to 50,000 listed buildings were owned by businesses or charities and used for residential or charitable purposes and that around 1,000 businesses and charities might be affected each year. All businesses undertaking alterations to listed buildings would be affected, including specialist tradesmen, but HMRC expected that one-off compliance costs would be negligible. No further evidence was provided to substantiate this.
27. HMRC thought that around 5,000 to 6,000 businesses routinely working on listed buildings might incur small costs from familiarisation with the new guidance and additional bookkeeping and a further 100,000 businesses providing construction services might incur ‘very minimal’ familiarisation costs. HMRC did not expect there to be ongoing business costs because there would be familiarity with making standard-rated supplies of repair and maintenance and simplifying the VAT rules could be expected to reduce the ongoing costs of compliance.
28. Heritage contractors are usually small firms to which the government pays particular attention where legislative and taxation impacts are concerned. In applying the so-called ‘Small firms impact test’ it was HMRC’s view that while the 20% VAT rate might affected businesses of all sizes undertaking listed building work there would be an impact on small firms (including tradesmen specialising in protected buildings), but HMRC did not specify or did not know what this would be. Consequently any VAT concession in the treatment for supplies of construction work by small firms was ruled out.
29. Notwithstanding Government assurances, the impact of the 2012 changes to VAT on jobs in the heritage sector was quickly identified as a serious concern by the IHBC and wider heritage sector and construction industry bodies.
30. A number of contractors with the particular expertise necessary for the appropriate repair of historic buildings - and an excellent reputation for craftsmanship - have recently closed or been placed in administration, over the past year. These include Killby & Gayford Group (255 staff); Linford-Bridgeman Limited (240 staff, including those of subsidiaries Dorothea Restorations and Trumpers); and Holloway White Allom (170 staff). Removal of the zero rate increased the costs on specialist conservation businesses that they were unable to pass on to their private sector customers, many of whom were themselves struggling to ensure they were maintaining and enhancing their building appropriately.
31. In addition to contractors, companies involved with the production and manufacture of specialist building components needed for historic building repair have needed to downsize significantly. These have included for example across a wide range of specialisms: Bricknell Conservation Limited; C J Building Ltd; Period Property Preservation Ltd; J Oldham & Co (Stonemasons) Ltd; Cumbria Stone Quarries; Caradale Traditional Brick; Copsale Oak Ltd; Crane Forge Blacksmiths; G Burditt & Co Ltd; Cy-Pres (lime products); and Devereux Decorators Ltd. All have shed staff and the associated, essential, specialist skills and these people may be lost to the industry in future by having to seek other forms of employment. Many other specialist conservation companies are now a fraction of their former size.
Concerns of the private sector
32. Within the private sector, the Country Land and Business Association (CLA) claims its members manage and/or own between a quarter and a third of all heritage in England and Wales and has strongly opposed the imposition of the change in VAT and has made it explicit that it is the zero rating of VAT on alterations to listed buildings that provides an incentive for owners to adapt them to make them fit for modern use.
33. CLA argues that historic buildings are disproportionately expensive to maintain given the specialist materials and skills required – and sometimes because of the scale and inaccessibility of the works - and this relief was virtually the only concession available to help alleviate the increased costs of ownership, particularly as 20% VAT is already levied on all repairs, with the HHA adding that removing this concession is likely to discourage owners from embarking on projects which will give historic buildings a viable future and dissuade potential buyers of listed buildings in need of rescue.
34. The HHA also reiterated the concerns of other sector bodies - not only about the impact on larger historic houses - but also about a likely downturn in the conservation building industry, with skilled contractors losing their jobs; the loss of opportunities for employment in traditional craft skills; and that all the effort and investment in recent years injected into combating the perceived skills shortages will have been for nothing. In rural communities this is stimulus is particularly important as historic houses and their associated repair and alteration are often a major source, sometimes the only source, of economic activity and employment in the local area.
Listed Places of Worship & VAT
35. The Listed Places of Worship Scheme (LPWS) was introduced in December 2001 as a temporary arrangement for eligible claims relating to repair and maintenance works. One significant impact stemming from the 2012 Budget about the withdrawal of the zero rate for approved alterations, was it’s the effect on the LPWS. 
36. To mitigate for the impact of this change, HMRC extended the LPWS in October 2012 to effectively preserve the zero rate for works to the fabric of the listed place of worship by a refund mechanism although this was not without difficulties for the cash-flow of the claimants as the cost of VAT needed to be paid before the reclaim could be made.
37. The key feature of the revision was that the Government made an additional £30M available for the scheme for the duration of the current Parliament; that is until 31 March 2015. The intention was that this would cover all the anticipated eligible claims, and provide greater certainty than the previous arrangements of pro-rata payments where it had transpired that claims had exceeded the available budget.
38. The Government than changed the scope and operation of the LPWS with effect from 1 October 2013; increased the annual budget to £42M; and simplified the scheme’s administration.
a. Additional works became eligible as did professional services directly related to eligible building work, such as architect fees could be included. For the first time the LPWS was also able to accept applications from religious or charitable groups whose principal or primary purpose is ‘to conserve, repair and maintain redundant listed places of worship not in private ownership’. Overall about 4,000 LPWS applications are made annually.
b. Given that European Union rules have recently changed to permit the UK Government to vary the rates of VAT that it charges if it chooses; there does not appear to be any reasonable impediment to the extension of the principle of the LPWS to a targeted scheme for other listed buildings. This is believed not to be a concern to the EU.
Lack of a government policy evidence base
39. At the time of the introduction of the 20% VAT increase, HMRC stated that the effects of this tax increase ‘might lead to a small increase in the price of alterations to listed buildings which would lead to a fall in demand (but...) the overall macroeconomic impacts are expected to be negligible;’ but the Government were unwilling or unable to provide any statistical evidence for this. Individual examples of the increased burden identified by the sector were dismissed as merely anecdotal.
40. In its defence of the increase, the HMRC claimed that one aim of was to tackle an ‘anomaly’ through which millionaire owners of listed buildings could install swimming pools without paying VAT, and MPs were briefed to this effect by the government. An analysis of more than 12,000 applications for alterations and concluded however that only 34 of these related to swimming pools and this anecdotal evidence as the basis for government heritage taxation policy was widely ridiculed in the national press.
41. Half of those who live in listed buildings are in the lower socio-economic groups C1, C2, D and E, but the Treasury has claimed that the majority of work being carried out to listed buildings is ‘not necessary for heritage purposes’. Information obtained through the Freedom of Information Act confirming that this evidence was based on 105 cases out of 30,000 was clearly not defensible. No more robust evidence has been released by the Treasury.
Bob Kindred MBE BA IHBC MRTPI
 See also the key reference documents below.
 From 1 April 1973 two rates: a standard rate of 10%, & zero rate on selected goods & services (e.g. food, books, children’s clothing). The main changes to the VAT since are: standard rate cut to 8% (29/07/74); higher rate on selected goods & services introduced (18/11/74) at 25% (initially just to petrol) & extended to a list of other supplies (01/05/75). Higher rate cut to 12.5% (12/04/76).
 Anthony Seeley, ‘VAT: Budget 2012 changes to loopholes and anomalies’ House of Commons Library Standard Note SN6298 3 September 2013.
 Although not a Listed building, in the case of 3 Trafalgar Road, Twickenham an unlisted semi-detached early 19th Century two-storeyhouse in a Conservation Area, identified as of special local interest and covered by an Article 4 Direction was demolished without consent because the owner was intent on rebuilding the front façade in facsimile and redeveloping behind to save the VAT. The owner was fined £80,000 on 26 July 2011. Details are given under Listed Buildings Prosecutions Commentary on the IHBC Resources web-page at http://ihbconline.co.uk/prosecutions/
 The Ancient Monuments Society; The Council for British Archaeology, The Garden History Society, The Georgian Group; The Society for the Protection of Ancient Buildings, The Twentieth Century Society and The Victorian Society but also including te Architectural Heritage Fund; the Association of Preservation Trusts; The Churches Main Committee; The Historic Chapels Trust; The Historic Houses Association; IHBC; ICOMOS UK, The National Trust; SAVE; The National Trust for Scotland; The Theatres Trust and The Ulster Architectural Heritage Society.
 John Sell, ‘VAT and listed buildings: findings of the recent study’, Context 64, December, 1999: http://www.ihbc.org.uk/context_archive/64/vat2/study.html)
 English Heritage, Power of place: the future of the historic environment, December 2000 p.11.
 Experian, ‘Value Added: the economic, social and environmental benefits from creating incentives for the repair, maintenance and use of historic buildings’, New Economics Foundation for the Prince’s Regeneration Trust, 2007.
 Rob Pickard and Tracy Pickerill, ‘A Review of fiscal measures to benefit heritage conservation’, RICS, FiBRE: Findings in Built and Rural Environments, July 2007.
 Referring to key government policy publications in a cover letter to the European Commission ‘Review of existing legislation on VAT reduced rates’, dated 7 May 2008, Scotland’s Deputy First Minister & Cabinet Secretary for Health and Wellbeing Nicola Sturgeon MSP writes ‘I see alterations to VAT legislation on reduced rates as one method of helping us achieve the goals we have set out…’. (http://www.scotland.gov.uk/Resource/Doc/1071/0063941.pdf). Her primary reference is to ‘The Government Economic Strategy’ (Scottish Government, November 2007, http://www.scotland.gov.uk/Resource/Doc/202993/0054092.pdf).
 In the private sector in Scotland, around 33% of all houses and 48% of houses built before 1919 required urgent repairs, while 36% of houses in tenements of all ages were in critical disrepair.
New Economics Foundation for the Prince’s Regeneration Trust ‘Value Added: the economic, social and environmental benefits from creating incentives for the repair, maintenance and use of historic buildings’, NEF 2007.
European Commission: ‘VAT Rates Applied to Member States of the European Union – Situation at 1st July 2011’ Ref: txud.c.1(2011)759291 – EN 27pp. (2011). Experian Report, March 2014 for Cut the VAT Campaign Coalition ‘An estimate of the effects of a reduction in the rate of VAT on housing renovation and repair work: 2015 to 20120’ Experian, March 2014 http://resources.fmb.org.uk/docs/VATResearchFinal.pdf
Tax Relief for Heritage: Lessons from abroad.
In the United States and Canada, a heritage building tax credit scheme operates through the National Parks Service. This enables developers to claim a tax credit on completed refurbishments (for social housing or restoring derelict/empty buildings) and provides a targeted rather than universal reduction which some in the sector have been calling for.
The Rehabilitation Tax Credit was established in 1986 and applies to costs incurred for rehabilitation, renovation, restoration, and reconstruction of historic buildings. The percentage of costs used as a credit is 10% for buildings in operation before 1986, and 20% for listed buildings. The credit is available to any person or entity that holds the title for an income producing property.
Expenses that qualify for the credit include those for the structural components of a building, eg walls, partitions, floors, ceilings, tiling, windows and doors, air conditioning and heating systems, plumbing, electrical wiring, chimneys, stairs, and other components related to the operation or maintenance of the building. Additionally, ‘soft’ costs (such as those under the UK Listed Places of Worship Grant scheme [see main text] such as architect or engineering fees also qualify for the credit. In addition to the federal tax incentive, some 30 States in the USA have some form of heritage tax incentive programme.
The United States Secretary of the Interior established 10 Standards for Rehabilitation, which projects must meet to be eligible for the 20 percent Rehabilitation Tax credit.
1. A property shall be used for its historic purpose or be placed in a new use that requires minimal change to the defining characteristics of the building and its site and environment. 2. The historic character of a property shall be retained and preserved. The removal of historic materials or alteration of features and spaces that characterize a property shall be avoided. 3. Each property shall be recognised as a physical record of its time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or architectural elements from other buildings, shall not be undertaken. 4. Most properties change over time; those changes that have acquired historic significance in their own right shall be retained and preserved. 5. Distinctive features, finishes, and construction techniques or examples of craftsmanship that characterise a historic property shall be preserved. 6. Deteriorated historic features shall be repaired rather than replaced. Where the severity of deterioration requires replacement of a distinctive feature, the new feature shall match the old in design, colour, texture, and other visual qualities and, where possible, materials. Replacement of missing features shall be substantiated by documentary, physical, or pictorial evidence. 7. Chemical or physical treatments, such as sandblasting, that cause damage to historic materials shall not be used. The surface cleaning of structures, if appropriate, shall be undertaken using the gentlest means possible. 8. Significant archaeological resources affected by a project shall be protected and preserved. If such resources must be disturbed, mitigation measures shall be undertaken. 9. New additions, exterior alterations, or related new construction shall not destroy historic materials that characterise the property. The new work shall be differentiated from the old and shall be compatible with the massing, size, scale, and architectural features to protect the historic integrity of the property and its environment. 10. New additions and adjacent or related new construction shall be undertaken in such a manner that if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired.
There are currently four kinds of tax relief to encourage historic building conservation the most interesting of these being property tax credits. These compensate the owner of listed buildings for the costs of a restoration or rehabilitation project. Rather than providing a grant for project costs, the local authority provides a once-only credit on property taxes.
In addition there are Property tax abatements, which compensate the owner for any increase in property taxes on a listed building following a successful restoration or rehabilitation project, spreading the resulting tax increase over several years; property tax relief, which rewards the owner of a listed building by providing a fixed percentage reduction in property taxes and as long as the owner continues to conserve it the tax relief can be made; and finally, sales tax grants and rebates.
These provide relief from provincial sales tax on materials and labour used for heritage conservation projects but only one province (Nova Scotia) currently uses this and the amount of the grant and rebate is limited to the 8% of the provincial sales tax.