The Heritage Counts report published in February 2020 by Historic England There’s No Place Like Old Homes: Re-use and Recycle to Reduce Carbon argues that by re-using our historic buildings avoids the emission of additional carbon. The building of a new home that has replaced a Victorian terrace can produce embodied carbon up to 13 times more than a refurbishment, the report suggests. However, even though this demonstrates a strong case for the re-use of our historic buildings, the report also acknowledges that the amount of VAT paid on a new build compared to the refurbishment of historic buildings is significantly different.
As it stands, a new build is zero-rated VAT whilst refurbishment, repair, and maintenance of historic buildings incur a VAT rate of 20%. Therefore, the incentive for developers to refurbish buildings that are possibly at risk of deterioration and decay becomes less attractive compared to that of a new build development. Further, the report also notes that in terms of housing stock, 38% of homes in the UK date from before 1946. Homeowners of historic properties looking to refurbish, repair, and adapt their homes are also penalised by the 20% VAT rate - thus, making it more expensive to do so.
The benefits of re-using our historic buildings include much more than their ‘green’ potential; for instance, the abundance of heritage assets in previous industrial areas are ripe for possible refurbishment, but as such these buildings with heritage interest are at risk of neglect, decay, and demolition through vacancy. There are approximately 542 mills in Greater Manchester and 540 in Lancashire, which have the potential to create thousands of new jobs and homes, according to previous research outlined in the report.
By cutting the VAT to a zero rate on refurbishments or at the very least to 5% – which is the rate of VAT on conversions of non-residential buildings to residential use – could go some way to encourage the refurbishment of many of our historic buildings whilst also preserving our industrial heritage.
What can be taken from the Heritage Counts report, is that by reusing and sympathetically upgrading our historic buildings, this can have a positive effect on the built environment and potentially go some way to the UK meeting its 2050 net-zero carbon emission target. However, Historic England’s aim to change the rules on VAT on the refurbishment, repair, and maintenance of historic buildings, has not been taken up by the Chancellor in the 2020 Budget, and as such, the unequal taxation rules on our built environment continue.
Aimée Dobb is Senior Heritage Consultant at ADAS.