VAT is a grey area… but let us add a little colour!

Author: Miss Susan Bunting

Published on: 14 December 2021

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, e.g. 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.

Pre-printed envelopes etc. used for fund raising: the following items are zero-rated:

  • 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.


The VAT position about building work relating to churches is as follows:

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 annex to a church


  • the annex is capable of functioning independently from the existing building
  • the main access to the annex 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.

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.


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).

Repairs, maintenance and alterations

These are standard rated but in the case of listed buildings mainly used for public worship VAT is a grey area… but let us add a little colour!
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 call or email the Diocesan Finance team.

The author...

Miss Susan Bunting

Director of Finance

This article is from...

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