VAT is a grey area… but let’s add a little colour!
Parochial Church Councils come within the scope of registration for VAT.

Whether they do so in practice depends on the extent to which they supply items which are taxable. In most cases, the taxable turnover will not be great enough to call for registration.
Some expenditure that most of our PCCs have are listed below, some of which attract reduced or zero–rated VAT.
Fuel and power – charges for the supply of fuel and power are subject to a reduced rate of 5%, provided that any business activities of the church, eg admission to premises for a charge or the letting of church buildings, represent no more than 40% of the total usage of the building. Where business use is 40% or more, supplies are apportioned, e.g. business use is 55% then 45% of the fuel can be supplied at the 5% rate and the remainder at the standard rate. Also, the 5% rate is applicable on a de minimis basis where the supplies do not exceed 2,300 litres of fuel oil, gas oil, or kerosene, or 1,000 kwh of electricity per month. If you are being charged the incorrect rate, contact your supplier as soon as possible, also request that they amend past bills.
The following items are zero-rated:
- Pre-printed envelopes etc. used for fund raising
- Collecting-boxes, regardless of the material from which they are constructed
- Printed collecting envelopes appealing for money (usually hand-delivered to domestic premises: envelopes used in the operation of planned giving schemes are not included)
- Pre-printed letters appealing solely for money for the charity.
- Pre-printed planned giving envelopes
- Envelopes used in conjunction with appeal letters and for forwarding donations, provided they are over-printed with an appeal request related to that contained in the letter
- Lapel badges of a nominal value given as a token in return for a donation, whatever the material of the badge.
Buildings
The VAT position about building work relating to churches is as follows:
a) Construction works
The following are zero-rated (so that the builder/supplier doing the work should not charge VAT).
- Construction of a new church This is subject to the issue of the appropriate certificate to the builder. A church building is regarded as new for this purpose if:
- there was no building on the area of construction before OR
- the previous building was demolished to ground level OR
- all that remains of the previous building is a single facade or when on a corner site, a double facade. In both cases, retention of the facades must be a condition of the planning consent.
- Construction of a new annexe to a church
Where:
- the annexe is capable of functioning independently from the existing building
- the main access to the annexe is not through the existing building or converse.
In cases where what is constructed does not meet the conditions above, it will not be zero-rated for VAT purposes and is likely to be an extension to the building. As such, it would therefore be eligible for the Listed Places of Worship Grant Scheme.
b) Construction of a new church hall
This is subject to the issue of the appropriate certificate, provided that the hall is to be used for the provision of social or recreational facilities for the good of the local community.
c) Demolition
Where the work is in the course of construction or re-construction which will itself be zero rated, and the demolition is down to ground level (but leaving foundations or leaving a single facade wall).
d) Repairs, maintenance and alterations
These are standard rated but in the case of listed buildings mainly used for public worship the VAT can be recovered under the Listed Places of Worship Grant Scheme. The Listed Places of Worship Grant Scheme makes grants towards the VAT incurred in making repairs and carrying out necessary alterations to listed buildings mainly used for public worship. The grant is paid to you after the work has been done and paid for. You need to retain original copies of all receipted repair invoices.
Details of the Scheme are available on a helpline: 0845 013 6601. There is also a Memorials Grant Scheme.
Aids for people with disabilities on church premises
The following are zero rated:
- the supply of the service of the construction of ramps and widening of doorways and passages in any building for the purpose of facilitating a disabled person’s entry and movement therein
- the supply of the service of providing, extending or adapting a bathroom or toilet for use by a disabled person in a building used mainly for charitable purposes.
If you have any questions on the article above please do contact Susan Bunting 01603 882377 or fhfna.ohagvat@qvbprfrbsabejvpu.bet
The author...
This article is from...
Articles in this issue...

If you go down to the woods today
The idea for our event was to celebrate Norfolk Day (Friday 27 July 2018) in association with Radio Norfolk and the Eastern Daily Press.
More
£22,000 pours in for leaking roof
Read how one church raised a substantial amount of money by holding an auction of promises. Hopefully some of you may feel that this might be a great way for you to raise some money
More
Slash the cost, the mess and the hassle of candles!
Many of you will already be aware of the benefits of using Nylon Oil candles, instead of traditional wax.
More
Theological am dram
Children love stories and each week thousands of primary aged children nationally have the chance to experience and engage with great classic stories from the Bible through the Open the Book initiative.
More
Inspired Classrooms Exploring churches as places of creative learning across the curriculum
Inspired Classrooms is a highly innovative and free online Toolkit designed to better connect parish churches to their local schools.
More
Rabbits in the headlights
18 months into incumbency, this LYCiG course was perfect timing. It was an exciting project not just for me but an opportunity for the Benefice as we continue our journey with God.
More
Risk and the comfort zone
We found the Leading Your Church into Growth course was a natural progression and an excellent vehicle for encouragement for all who want to see their communities grow in faith, service and numbers.
More
Simple suggestion leads to perfect finish
After receiving a donation, St Peter’s PCC embarked upon obtaining quotations from local Electrical Contractors for the renewal of their outdated heating installation and obtaining a Faculty.
More
Professional help to complete our project
Our Quinquennial Reports for St Peter & St Paul, Sustead had been warning us for some time that the tiles on the chancel roof were badly laminated.
More