VAT Reclaim for Churches

Churches and places of worship play an important role in local communities, culture and the UK’s national story. Many act as custodians of historic churches, listed buildings and other religious heritage buildings that require ongoing maintenance and investment. Funding is often directed towards projects designed to preserve heritage buildings and maintain their accessibility for future generations.

Despite charitable status, churches are still required to pay VAT on many goods and services, particularly when undertaking repairs, alterations, construction works or other building projects. VAT on professional fees, materials and contractors’ services can represent a substantial cost. Understanding when VAT applies, when reliefs are available, and when VAT can be reclaimed is necessary for managing expenditure and protecting long-term funding tied to religious heritage buildings.

The VAT People provide specialist VAT advice to churches, dioceses and local congregations. We assist with interpreting complex VAT rules, identifying available VAT relief, reviewing grant-funded projects and supporting VAT reclaims where permitted under the legislation.

For advice tailored to your church or diocesan body, contact The VAT People on 0161 477 6600 to speak to a VAT specialist, or complete our online contact form and a member of our team will be in touch.

Why choose The VAT People?

The VAT People provides specialist advice on VAT reclaim for churches, charities, and faith organisations, supported by almost 30 years of experience and a detailed understanding of how HMRC applies VAT rules in practice. Our team includes former senior HMRC officers and consultants with decades of hands-on experience. This allows us to identify risks, opportunities and practical solutions that are often missed by general advisers.

We provide clear, technically robust VAT advice that reflects the practical realities faced by churches operating with exempt income, non-business activity and restricted VAT recovery. Our support covers high-level VAT planning, consideration of available reliefs and grant schemes, partial exemption and potential reclaim opportunities. All advice is evidence-based, defensible in the event of HMRC review, and aligned to the specific activities, funding arrangements and governance structure of each church or diocesan body.

Churches and charities instruct The VAT People for our direct advice, technical depth and experience in dealing constructively with HMRC where issues arise. We work alongside trustees, finance teams and professional advisers to reduce exposure to irrecoverable VAT, maintain compliance and support informed decision-making where long-term financial commitments are involved.

How The VAT People support churches

The VAT People understand the financial and administrative pressures churches face, particularly where historic buildings, grant funding and restricted VAT recovery intersect. Our support is practical, technically rigorous and focused on reducing irrecoverable VAT wherever the legislation allows.

We support churches by:

With extensive experience advising charities, churches and heritage organisations, The VAT People provide clear, technically robust advice that protects charitable funds and supports long-term compliance. Our approach is grounded in how HMRC applies VAT rules in practice, giving churches confidence when making decisions that carry financial and governance implications. To discuss how we can support your church, contact The VAT People on 0161 477 6600 and speak directly with a VAT specialist.

How VAT applies to churches and places of worship

Churches are not automatically exempt from VAT. They fall within the same VAT framework as other charities, and their position depends on the nature of their activities and how income is generated.

In broad terms, church income and activities usually fall into the following categories:

• Voluntary donations and certain grants: where payments are freely given and nothing is provided in return, the income is outside the scope of VAT. No output VAT is due and this income does not count towards the VAT registration threshold.
• Business activities for consideration: where payment is directly linked to a supply - such as hall lettings, cafés, bookshops, ticketed events or fee-based services - the activity may fall within the VAT system. The correct VAT liability must be established and, if taxable turnover exceeds the threshold, VAT registration is required.
• Exempt activities: some supplies, such as certain property lettings or qualifying fundraising events, may be exempt. While no VAT is charged, input VAT linked to these activities is generally not recoverable.
• Mixed activities and shared costs: where expenditure supports taxable, exempt and non-business activities, VAT must be apportioned. Partial exemption and business/non-business calculations may apply.

Early assessment of how activities are classified allows trustees to understand potential irrecoverable VAT exposure before committing to major projects or ongoing expenditure. By reviewing income streams, proposed developments and funding arrangements at the planning stage, it is possible to identify risks, assess recovery opportunities and avoid unexpected VAT costs later.

The VAT People supports churches and diocesan bodies with this analysis, providing clear advice on VAT liability, registration, partial exemption and reliefs. Our focus is on establishing a defensible VAT position from the outset, reducing exposure and supporting informed financial decision-making. Get in touch today for tailored advice to the needs of your place of worship.

FAQs about VAT relief for churches

Are churches VAT exempt?

Churches are not automatically exempt from VAT. For VAT purposes, churches are treated in the same way as other organisations and must apply the VAT rules based on the nature of their activities. Many church activities, such as the provision of religious services and the letting of space for worship, fall outside the scope of VAT or are exempt, which means no VAT is charged on the income received. However, this treatment also restricts the recovery of VAT incurred on related costs. Where a church carries out taxable activities - for example, operating a café, running events for a charge or selling goods - those supplies may be subject to VAT, and registration may be required if the taxable turnover exceeds the VAT registration threshold. Each income stream and activity must be reviewed individually to determine the correct VAT treatment and the extent to which VAT incurred can be recovered.

What grants, funding and government support are available to churches?

Churches may access financial support through a range of grant and funding programmes at national and local level. These can include schemes such as the Listed Places of Worship Grant Scheme, worship-related renewal or capital funds, and other initiatives supported by government departments and heritage bodies.

Funding is commonly directed towards the preservation of historic and listed buildings, the protection of heritage assets, and the continued use of church buildings for community purposes. Grants may also support essential structural repairs, accessibility improvements, energy efficiency works and wider capital projects designed to secure the long-term viability of church properties.

While grant income itself will often fall outside the scope of VAT, the VAT treatment of costs funded by those grants requires careful consideration. VAT incurred on professional fees, building works and related expenditure may be recoverable, restricted or blocked depending on how the church uses the building and how activities are classified for VAT purposes. The interaction between grants, VAT recovery and partial exemption should be reviewed in advance to understand the financial impact of any proposed project.

What is the Listed Places of Worship Grant Scheme?

The Listed Places of Worship Grant Scheme is a government-backed scheme that refunds VAT paid on eligible repair works to listed buildings used for worship. It allows churches and other listed places of worship to reclaim VAT on qualifying repair costs, supporting the ongoing maintenance of historic and architecturally significant buildings.

The scheme covers repairs such as masonry work, roof repairs, rainwater goods, drainage and other fabric repairs required to preserve the building. VAT must be paid upfront to suppliers, with claims submitted retrospectively to HM Government for reimbursement.

The current funding allocation for the scheme is capped at £23 million. At the time of writing, there is a £744,267 budget remaining. The scheme will be disbanded when the £23 million funding limit is reached. Once the cap is met, no further claims will be accepted, regardless of the date.

While the scheme has operated for many years through successive funding rounds, concerns remain around long-term funding certainty. Sector bodies, including the National Churches Trust, have highlighted the financial pressure this creates for churches planning multi-year repair programmes where VAT recovery is a material cost consideration.