Running a historic house and its associated lands as a family estate or trust has become the most popular way to ensure estates, their history and stories survive for future generations.

Often, this means the house and many of its rooms & contents are opened to the public. Where a historical house charges admission, any of the assets on public display, such as furniture, antiques or works of art are viewed as business assets. HMRC has recently updated its guidance on assets used by historic houses.

If the business is VAT registered, output tax would be due upon disposal. An exception to this is where the disposal is either by private treaty sale (privately arranged sale to UK national museum, gallery or Art Collections Fund), or for acceptance in lieu of estate duty, capital transfer or inheritance tax. In these cases, the disposal is exempt from VAT, however, in order to qualify for this exemption, the work must be of national, scientific, historical or architectural interest.

Alternatively, if the assets were treated as private assets, any subsequent disposal would be outside the scope of VAT. Newly acquired assets can be treated as private assets by contacting HMRC’s VAT helpline and providing them with the relevant information. It should be noted that if the asset is treated in this way, any input VAT incurred on the acquisition cannot be recovered. Existing business assets can be reallocated as private assets however it must be shown that the asset is no longer used for business purposes, for example, by moving it to a part of the house used for private purposes only.

It should be noted however that if the owner was entitled to recover input VAT when the asset was acquired, then output VAT must be accounted for when the asset is reallocated as a private asset. If VAT was not charged on the acquisition (such as an inherited asset), then no VAT is due on the reallocation.

Where goods are bought partly for business and partly for non-business use the portion of their input tax in relation to their business use of the asset can be reclaimed. If the asset is used partly for private use, all the input VAT can be recovered however output VAT should be accounted for each quarter for the private use.

For more information on the contents of this blog, please contact me here. Our specialist VAT department will also be able to offer you support on this or any other area of VAT.

Ian Craig
Ian.craig@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice.  This is based on our understanding in August 2018. Laws and tax rules may change in the future.