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Churches pay full VAT

September 9th, 2003
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REDUCED RATE OF FACTS

EU bars move to cut Church VAT
The Church of England faces soaring repair bills to its churches after the European Commission rejected government proposals to cut VAT.  To the dismay of church leaders, the commission has recommended that Churches should pay the full 17.5 per cent on repairs to listed buildings used as places of worship. Gordon Brown, the Chancellor, has argued that religious organisations should pay a reduced rate of five per cent.  Since 2001 the Treasury has been granting the Churches millions of pounds to make up the difference. 
(The Daily Telegraph, 9 September 2003, page 4)

Under the Listed Places of Worship Grant Scheme, the UK government provides financial support to churches that have had to undertake repairs.   This allows churches to reclaim 12.5% of the cost of repairs, in effect reducing VAT to 5%.    The scheme runs “very successfully” according to the Church of England.  It ensures churches receive the full financial benefit.
In July of this year the European Commission, following consultation with the Member States, put forward its new proposals for the areas where a reduced rate of VAT could be applied in Member States i.e. what goods and services could be subject to a lower rate.  Church repairs were not among them, as the Commission believes that, in this area, member states have more appropriate means to finance church repairs.   Amongst other methods, these may take the form of direct subsidies or, in the case of the UK’s existing scheme, grants.   There is no guarantee that a lower rate of VAT on church repairs will be fully reflected in lower bills for churches.

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