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Tax Rates & Allowances

Charities and the ‘change of use’ charge

Charities obtaining zero-rated new buildings and construction work under an extra statutory concession for relevant charitable purposes will no longer be liable for any VAT charge if there is a later ‘change of use’.

From 21 March 2007, HMRC will not enforce a VAT charge if ‘non qualifying use’ of the building subsequently exceeds 10% if this was not initially anticipated.

HMRC are inviting claims for refunds of such VAT charges paid by charities subject to the 3 year cap.

Our view
This measure appears to be primarily aimed at Academies and allowing wider community use of their existing sports facilities without it leading to a VAT cost. However, it does not mitigate the VAT costs on these types of facilities where such use is anticipated on purchase/construction. It may also lead to potential uncertainty in obtaining zero-rating in the first instance.

Impacted charities should consider whether they are entitled to make a refund claim.



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