# Whitechapel Art Gallery VAT ruling encouraging for charities

- Link: https://fundraising.co.uk/2008/07/11/whitechapel-art-gallery-vat-ruling-encouraging-charities/
- Published: 2008-07-11T14:14:56+01:00
- Author: Howard Lake

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A VAT tribunal has ruled that Whitechapel Art Gallery was eligible to use a VAT 
saving scheme on its renovation costs of over £10 million when it aquired the former
Whitechapel library above Aldgate East Tube station in London.

The VAT saving scheme means that the charity does not bear the VAT cost upfront 
but can spread it over ten years. In the past, HM Revenue and Customs (HMRC) has
stated that although this scheme is available to charities buying a building or 
constructing a new building, it did not apply if they were renovating an existing
building.

The tribunal ruled in the Gallery’s favour saying it was in contravention of EU 
law not to include substantial renovations in the VAT saving scheme. The tribunal
thought that HMRC’s view was particularly hard on the charity as they were renovating
a listed building which they could not demolish and reconstruct, even if it was 
the cheaper option.

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Debbie Jennings, VAT Director at accountants and business advisers PKF, commented:“
This is very encouraging news for charities because the cost of building and renovation
work is often their largest outlay. Having to pay all of the VAT upfront can push
the overall costs into the realm of un-affordable.

“This ruling gives charities hope that any substantial renovation work they do in
future will now be eligible for the VAT saving scheme. However, we have to sound
a note of caution as the EU is proposing to remove this VAT saving scheme from land
and buildings entirely. If and when this happens it will be a major blow to charity
finances.”

www.pkf.co.uk

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