The Church of England has released guidance for parishes, encouraging them to review building projects in-line with opportunities to reduce costs through VAT reliefs.
We are sharing this guidance to support treasurers and PCCs in making informed decisions about building works and long-term stewardship.
Key highlights from the guidance
- 0% VAT may apply to certain church building works where the building is used for charitable, non-business purposes (e.g. worship, pastoral care, community outreach)
- Energy-saving installations (e.g. solar panels, heat pumps, insulation) can be zero-rated when installed by contractors until 31 March 2027
- Accessibility improvements, such as ramps, widened doorways and accessible facilities, may qualify where they improve access for disabled people
- New buildings and qualifying annexes may be eligible for full zero-rating if used wholly for charitable purposes and meet HMRC conditions
We want to highlight that eligibility depends on clear evidence of intended use. HMRC typically expects buildings to be used almost entirely for non-business activity, supported by documentation such as PCC minutes, usage plans and mission statements.
There are also important limitations to be aware of. Most repairs, maintenance and professional fees remain subject to standard VAT, and combining qualifying and non-qualifying works under a single contract can risk losing access to relief.
As many of our parishes are not VAT-registered and therefore cannot reclaim VAT, securing zero-rating where possible can make a significant difference to project affordability. We encourage treasurers to seek professional advice early and plan projects carefully.