HM Revenue and Customs (HMRC) allows certain building works on churches and other charitable buildings to be zero-rated for VAT (charged at 0%). This is particularly important for churches that are not VAT-registered and therefore cannot recover VAT on construction costs.
Zero-rating applies only in specific circumstances. Most commonly, it is available for works that assist disabled people, the installation of qualifying energy-saving materials, and the construction of new buildings or qualifying annexes, where these are intended to be used wholly for charitable, non-business purposes.
Works to improve access for disabled people may qualify where they are specifically designed to assist access or movement within the building. This can include ramps, widened doorways, accessible toilets, and related works. However, some elements, such as new door openings or lifts, are usually standard-rated.
A temporary zero rate also applies to the installation of energy-saving materials, such as solar panels, heat pumps, and insulation, until 31 March 2027, provided the building is used entirely for charitable, non-business purposes. Care should be taken not to combine these works with general repairs under a single contract, as this may result in the standard rate applying to the whole project.
Zero-rating may also apply to entirely new buildings or qualifying annexes used solely for charitable purposes. Extensions and most alterations to existing buildings do not qualify.
A key condition is that the building must be used wholly for charitable, non-business purposes. Where business use (such as commercial hire or cafés) is more than incidental, relief may be restricted or lost.
Most churches are not VAT-registered, meaning VAT on works is normally irrecoverable. Zero-rating is therefore often the only way to reduce VAT costs. Contractors must hold appropriate certification before applying the zero rate, and this should be agreed before work begins.
Repairs, maintenance, and conservation works are generally subject to VAT at the standard rate, as are professional fees. Previously, some of these costs could be reclaimed through the Listed Places of Worship Grant Scheme. However, this scheme has now closed, meaning VAT on repair and maintenance works is typically a direct cost to churches. This makes it particularly important to identify, at an early stage, whether any elements of a project may qualify for zero-rating.
Churches should ensure that projects are carefully planned and documented, and should seek professional VAT advice where there is any uncertainty about eligibility.
Download our note on zero-rated VAT
Further details can be found in our zero-rated VAT note