HL Deb 27 January 1992 vol 534 cc1056-8

3.48 p.m.

The Earl of Kinnoull

asked Her Majesty's Government:

Whether they will consider exempting VAT for all charities that have raised appeal funds for specific new buildings; whether they are aware of apparent differing interpretations by VAT offices in such cases; and whether other Community member states have independent policies in this regard.

The Minister of State, Department of Transport (Lord Brabazon of Tara)

My Lords, the source of the funds is irrelevant in determining the VAT liability of the building. Charities are already relieved of VAT on new buildings used solely for non-business activities. The Government are aware that the interpretation of the unique facts of each individual case may result in apparently differing rulings being given. Customs will look into any instances of inequality of treatment. There are significant differences between member states in their definitions of charities.

The Earl of Kinnoull

My Lords, I thank my noble friend for that reply. Is he aware that there is a good deal of confusion among charities as to whether or not new buildings are exempt? On many occasions they are forced to incur expensive professional advice in order to present a case, often with differing results. Could not, for example, a new medical building be exempt and thereby join the category of residential buildings and churches?

Lord Brabazon of Tara

My Lords, I am aware that there are differences in the treatment of cases. As I said in my original Answer, Customs will look into any instances of inequality of treatment. I should be happy if my noble friend were to advise me on the case he has in mind. I draw the attention of the House to a leaflet published by Customs and Excise entitled Construction: VAT certificates for residential or charity buildings, which I hope will answer many of the questions which charities may have on the subject.

Lord Peston

My Lords, can the noble Lord take the matter a little further? As I understand it, irrespective of the source of funds, charities are not supposed to pay VAT on new buildings. Can the noble Lord explain the position with regard to the repair and maintenance of existing buildings? Why single out new buildings for special treatment? Why not try to encourage charities to up-date and refurbish existing buildings and thereby make better use of them? Can the noble Lord enlighten the House as to the VAT position on new buildings? Have the Government thought any further on this matter?

Lord Brabazon of Tara

My Lords, as I said in my original Answer, new buildings are already relieved of VAT if those buildings are used for non-business activities. Indeed, they can be relieved of a proportion of VAT in a case where a proportion of the building is used for non-business activities pro rata. That, I believe, will apply in the same way to repairs and maintenance.

Lord Peston

My Lords, it is obvious that I am not an expert in this matter. Is the noble Lord saying that as a matter of tax law the repair and maintenance of an existing building are treated in exactly the same way as the construction of a new building? Is that the state of the law as he understands it?

Lord Brabazon of Tara

My Lords, repair and maintenance are a different question. I would have to make absolutely certain of my case before answering. If I am wrong in what I have said, I shall write to the noble Lord.

Lord Williams of Elvel

My Lords, in his reply the noble Lord said that different rules apply to charities in different member states of the Community. Are we to understand that the Charities Bill, which is at present before your Lordships, does not make any allowance for different rules between different member I states and that we are not aligning ourselves with other members of the Community? Are we also to understand that charities set up in other member states of the Community can operate as charities here but will not be subject to the Charities Bill when it becomes an Act? What effect will that have on the VAT principle for buildings?

Lord Brabazon of Tara

My Lords, the noble Lord asked me a number of questions about the Charities Bill. My noble friend Lord Ferrers may be able to answer some of them when we reach the Report stage. So far as concerns new building work, as I have said, it depends on the extent to which a building is used for non-business purposes.

Lord Williams of Elvel

My Lords, the noble Lord said in his reply that there is different legislation for charities in different members of the Community. Will he reply to my precise point? Does this affect French charities, Dutch charities or German charities that may be engaged in building activities of one kind or another in this country?

Lord Brabazon of Tara

My Lords, any charity, whether foreign or not, that wished to operate in this country would have to register with the Charity Commission and would have to be counted as a charity in this country.