Grand designs, lofty price tag

End of VAT exemption could add £150m to cost of tending listed buildings. David Matthews reports

July 12, 2012

Credit: Alamy
Sky high: universities with historic buildings could face rocketing bills

Universities in England might have to spend more than £150 million extra on altering listed buildings over the next five years because of an end to the VAT exemption on such work.

One University of Cambridge college president has warned that the tax rise could cost as much as 5 per cent of its annual budget for teaching, research and student support.

The government has argued that the change is justified because the current exemption, which applies only to alterations, not repair and maintenance, gives a "perverse incentive for change as opposed to repair".

"The majority of the work covered by the relief consists of extension work, which is not necessary for heritage purposes," the government said in a consultation document released as part of the Budget on 21 March.

It also said that the dividing line between repair and alteration is a "major source of confusion".

But James Lawrie, treasurer of Christ Church, Oxford, said that a survey of the institution's colleges in May found that the VAT changes would cost about £4 million a year. He estimated that Oxford accounts for about 13 per cent of the sector's total spending on listed buildings because in 2009 it was allocated this proportion of the Higher Education Funding Council for England's "old and historic buildings" fund - a grant stream that has since been scrapped.

If Oxford's £4 million annual bill is scaled up using the Hefce figures, English universities will have to spend an extra £156 million over the next five years because of the tax change, Mr Lawrie estimates. The government expects the change to bring in £125 million a year in tax revenue by 2016-17.

Organisations including the Church of England and the National Trust have already spoken out against the move, but now several members of the House of Lords have warned of the impact on universities.

Baroness Deech, a former pro vice-chancellor at Oxford and a cross-bench peer, told the House of Lords on 5 July that "nearly every university, old and new, has listed is like an extra tax which will reduce the amount that universities have for bursaries".

Lord Eatwell, a Labour peer and president of Queens' College, Cambridge, said that his college "contains some of the most beautiful, Grade I listed buildings in the country" and as a result the VAT increase would cost "up to 5 per cent of the teaching, research and student-support budget".

However, Lord Sassoon, commercial secretary to the Treasury, said universities' estimations of the cost "seem to vary considerably". "I do not therefore recognise the £150 million figure, but I accept that there is a cost," he told the Lords.

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