Written evidence submitted by the Heritage Alliance


The Heritage Alliance unites over 150 independent heritage organisations in England as a powerful, effective and independent advocate for heritage. As England’s biggest coalition of heritage interests, it brings together independent heritage organisations from the National Trust, English Heritage, Canal & River Trust and Historic Houses, to more specialist bodies representing visitors, owners, volunteers, professional practitioners, funders and educationalists. Its members – 7 million volunteers, trustees, members and staff – demonstrate the strength and commitment of the independent heritage movement. Most of England’s historic environment is owned, managed or cared for by Heritage Alliance members.



  1. This submission to the Treasury Select Committee’s Call for Evidence highlights the need to reform the tax system to promote the repair and maintenance of the UK’s irreplaceable heritage assets, whilst stimulating the economy and tackling climate change.


  1. England’s heritage industry is valuable. England’s heritage industry directly contributes £13.1bn in gross value added (GVA). This is larger than the security industry, defence industry and the aerospace industry in the UK. Indirectly, England’s heritage industry contributes £29bn, equivalent to 2% of national GVA. Additionally, the heritage sector directly employs 196,000 people – 1% of total national employment, and also attracts millions of domestic and international tourists each year with £16.9bn spent at heritage sites.[1]


  1. Tax arrangements have a huge impact on all kinds of heritage. Full rate VAT is usually charged on maintenance and repairs, while new buildings are zero-rated. The income from Heritage Maintenance Funds is taxed at 45%, meaning that at the marginal rate nearly half this income is unavailable to spend on maintenance.


  1. The impact of COVID-19 on the UK’s heritage sector has been significant. During what would usually be their peak season, heritage sites have had to make difficult decisions about paying staff, utilising reserves and maintaining sites and collections. According to a survey of over 1,200 heritage organisations across the UK carried out by the National Lottery Heritage Fund in the first week of April, 82% reported high or moderate risk to their organisation’s long-term viability and 46% believe they could  not survive for another six months.[2] This financial impact is likely to continue in the long term, with members of the Alliance raising the real possibility of redundancies and the pandemic making it harder to engage the public.


  1. Tax changes should be considered as a priority to support the heritage sector, especially after the additional financial pressures and insecurity that coronavirus has initiated. The proposals suggested will not only protect our heritage at a crucial time but stimulate the economy and contribute to the Government’s 2050 net zero emission target.


  1. Tax arrangements have a huge impact on all kinds of heritage. Full rate VAT is usually charged on maintenance and repairs, while new buildings are zero-rated. The income from Heritage Maintenance Funds (which enable important historic houses to ring-fence funds, from their own resources, for maintenance) is taxed at 45%, meaning that at the marginal rate nearly half this income is unavailable to spend on maintenance.


  1. Tax changes should be considered as a priority to support the heritage sector, especially after the additional financial pressures and insecurity that coronavirus has initiated. The proposals suggested will not only protect our heritage at a crucial time but stimulate the economy and contribute to the Government’s 2050 net zero emission target.


VAT reform

A simplification of the VAT system to incentivise re-use and ensure parity of treatment for the repair and maintenance of existing buildings as compared with new build.

  1. Our historic environment requires repair and maintenance. This includes the maintenance, repair and retrofit of buildings, landscapes and collections. However, most heritage, including that which the Government has designated as nationally important, is looked after by private owners at their own cost, or by volunteers. These heritage spaces create places where people want to live and work and are the cornerstone to making the UK attractive to tourists.


  1. We believe it is the collective responsibility of the sector, Government, the construction industry, and the wider population to promote the repair and maintenance of the existing building stock in the UK. We advocate for the implementation of a more positive, and simpler, tax regime for repair, maintenance and conservation of heritage assets.


  1. Work to historic buildings is currently subject to 20% VAT, yet no VAT at all is charged on new buildings. This creates an environmentally unfriendly incentive to demolish old buildings.


  1. The Building Better, Building Beautiful report re-states this case, noting:  “Among our specific proposals, we advocate radical reform of the VAT provisions so as to remove the incentive favouring new-build over re-use when it comes to discarded buildings. Such reforms will bring to an end the unnecessary and ecologically unacceptable destruction of adaptable and durable buildings, and their replacement by short-lived glossy boxes… Government should align VAT on housing renovation.”  It also argues these tax regimes potentially more than double the tax liability to landowners who take a long-term interest in creating better places[3].


  1. VAT on repairs and maintenance has a suppressive effect on economic activity around construction and has resulted in consequential loss of capacity among heritage specialists who are essential for the appropriate care of historic buildings. This has had a negative impact on reviving or promoting enterprise, craft skills and apprenticeships[4]. According to the Federation of Master Builders, a cut in the VAT on home improvement works would stimulate the industry, as tax would no longer be a barrier to homeowners doing repairs and making upgrades, including the energy efficiency, of their buildings.[5] Research commissioned by Experian in 2015[6] found the impact of reducing the rate of VAT on residential repairs and maintenance from 20% to 5% (over the 5-year period from 2015 to 2020) was estimated to generate an stimulus of £15bn over the 5-year period to 2020 at a cost of £6.6bn over the same period.


  1. Therefore, implementing VAT reform would not only ensure the continued existence of our beloved historic environment, it would kickstart the construction sector after the pandemic. There is an opportunity for the equalisation of VAT between repair and maintenance and new build to support the growth of the sector. Most heritage organisations will not have the funding to carry out essential maintenance and do planned capital work. By encouraging capital projects through a lower VAT rate, small organisations of specialist builders and craftspeople will be able to find more work and continue to support the longevity of the sector.


  1. Creating an equalisation at 0% VAT will be particularly impactful on levelling up to a greener infrastructure and way of life. We are aware that whilst the UK remained in the EU this was cited by Government too difficult, but with our departure from the EU, an opportunity is created for simplification where VAT is set equally for all construction work whether new build or repair and maintenance. This will encourage UK homeowners to carry out energy efficient repairs and improvements, avoiding future carbon emissions from buildings.


  1. Buildings are today the third largest greenhouse gas (GHG) emitting sector in the UK. The construction of new buildings emits 48 mega-tonnes of carbon dioxide in the UK each year – that is equal to the total emissions for the whole of Scotland. Historic England commissioned Carrig Conservation International to undertake a research project for Heritage Counts entitled “Understanding carbon in the historic environment”[7]. Using actual data from two historic buildings, a life cycle assessment model was developed and used to compare the embodied and operational carbon emissions before and after energy efficient refurbishment was undertaken, as well as between demolition and new build versus repair and retrofit. The research shows that carbon emissions are reduced by more than 60% by 2050 as a result of the refurbishment and retrofit.


  1. Given the Government’s stretching targets around reaching Net Zero by 2050, a renewed focus on place, quality of life, and a growing recognition of the role of heritage in achieving these important public outcomes, now is the time to ensure that Government is doing everything it can to create the right conditions for encouraging repair and recycling of buildings.


  1. There is currently a zero rate for the construction of a new building which will be ‘used solely for a relevant charitable purpose’ (for non-business use or as a village hall) yet repair and maintenance on such buildings, many of which will be heritage buildings, does not receive the same discount. This likely drives organisations and developers to replace rather than repair heritage buildings. A potential simplification could include zero rating all construction work on a building which will be ‘used solely for a ‘relevant charitable purpose’’. This would then include both new and existing properties.


  1. We recommend that the tax system better recognises owners’ burdens and supports sustainable economic use and re-use of heritage buildings, which in turn is better for the environment.


  1. Our proposals for environmentally beneficial VAT reform include several options that could be considered by Treasury:

        Parity on VAT to match new build is ultimately essential and is possible now we have left the EU. A 0% equalisation would have the greatest impact. The Treasury would want to consider and analyse how this parity can be best achieved.

        We have previously proposed a way in which the Government could pilot and test a grant scheme which would refund the VAT charged in certain circumstances. This could operate along the lines of the Listed Places of Worship Grant Scheme, which sets a clear precedent and could be trialled in areas of great need such as Heritage Action Zones and Heritage High Streets. This pilot could test the positive impacts on productivity and take-up of repair with a view to further roll-out or VAT change.

        The VAT regime could be amended for a trial period to incentivise repair in this time of climate crisis, with a view to extension if it is successful, with proper evaluation.



Income tax on Heritage Maintenance Funds

A commitment to the continuation of the Heritage Maintenance Funds scheme and reduction of the income tax rate on these funds to 20%.

  1. Heritage Maintenance Funds (HMFs) are effectively the only measure on the statute book aimed explicitly at promoting heritage maintenance. However, at present, HMFs simply do not live up to their name.


  1. For custodians, the principal attraction of setting up a maintenance fund remains the capital tax advantage (the exemption from inheritance tax). However, there is no ongoing tax advantage thereafter. This is because the annual income from maintenance funds is taxed at 45 per cent, the highest rate of income tax. In other words, funds that purport to be dedicated exclusively to promoting the maintenance of important heritage have nearly half the available income automatically removed each year by the Revenue. Consequently, the option to invest in a maintenance fund is hardly used. Information from HMRC indicates that there were 134 HMFs in existence in 2018. In other words, fewer than ten per cent of Historic Houses’ member properties hold assets in the form of an HMF. Furthermore, approximately half of these are likely to be dormant (i.e. only contain nominal assets).


  1. Therefore, the income tax rate on these funds is insufficient and is causing a market failure in the provision of repair and maintenance to heritage assets.


  1. Private owners of historic houses have an estimated collective conservation backlog of £1.38 billion, of which £500 million is deemed to be ‘urgent’.[8] These houses are among the most significant heritage properties in the country, mostly listed at grade I or II*. Lowering the tax rate on Heritage Maintenance Funds would inject more investment in repair and maintenance in properties that are dispersed across the country. Of Historic Houses’ 1,500 members fewer than five are houses in the metropolitan area of greater London. This tax reform would therefore generate economic activity in non-metropolitan, rural parts of the UK and support the Government’s ‘levelling up’ agenda.


  1. A strong (and costed) business case has been developed, supported by the sector, showing that reducing income tax on Heritage Maintenance Funds from 45% to the basic rate of 20% would generate a net benefit of £85.5m by 2023[9]. This benefit derives from the additional tourism visits that would be carried out (because more historic houses would be open to the public), the additional maintenance and repair work that would be carried out, and the general enhancement to wellbeing that arises from greater public access to well looked-after heritage assets.


  1. We recommend a continuation of the Heritage Maintenance Funds scheme, supported by a reduction of the income tax rate on these funds to a basic rate of 20%.

Listed Places of Worship Grant Scheme

A commitment to the further the continuation of the Listed Places of Worship Grant Scheme.

  1. We call on the Government to confirm that the transformative Listed Places of Worship grant scheme will be funded at its current level (at least) beyond March 2021 so that recompense for the VAT incurred on eligible costs continues to benefit this internationally important class of buildings, enabling them to be kept in good condition and continue in use as social hubs.


  1. We also ask for a commitment from the Government that it will continue to work with the Places of Worship Sector to review and respond appropriately to the needs of listed Places of Worship.


September 2020








[1] Historic England. https://historicengland.org.uk/content/heritage-counts/pub/2018/heritage-and-the-economy-2018/

[2] National Lottery Heritage Fund. https://www.heritagefund.org.uk/blogs/how-coronavirus-covid-19-affecting-heritage-sector

[3] Building Better, Building Beautiful Commission. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/861832/Living_with_beauty_BBBBC_report.pdf

[4] IHBC. http://ihbconline.co.uk/toolbox/research_notes/vat.html

[5] Federation of Master Builders. https://www.fmb.org.uk/about-the-fmb/newsroom/construction-recovery-needs-a-vat-cut/

[6] Experian. https://www.ihbc.org.uk/resources/VAT-research-FINAL.pdf

[7] Historic England. https://historicengland.org.uk/content/docs/research/understanding-carbon-in-historic-environment/

[8] DCResearch. The Economic and Social Contribution of Independently Owned Historic Houses and Gardens: Final Report, October 2015, pp. 39, 66.

[9] Historic Houses. https://www.historichouses.org/uploads/assets/uploaded/ba0b7979-fb87-4f8d-9fe3acac1d3bd96c.pdf