Charities that occupy listed buildings and were planning to make improvements to them will find they now have to pay VAT on the works, following today’s Budget.

Richard Wild, VAT director at accountants PKF, said the withdrawal of zero rating relief on approved alterations to listed buildings would come as an “unwelcome surprise” to some charities.

The change will mean that if the improvements did not begin before today, the work will cost 20 per cent more than it would have if it had started before the Budget.

Wild said PKF had a charity client that was due to complete a £6m renovation project at its headquarters, and if it had not already started it would have cost over £1m more because of the Budget announcement.

“There are a few large, eminent charities that occupy listed buildings, especially in London,” he said. “I would think they will be worrying now.”

However, the change will not affect charities that charge members of the public to visit their listed buildings, such as the National Trust, because it only applies to buildings used for charitable, non-business purposes.

Wild added that the separate move within the Budget document to withdraw charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials, will create a double-whammy.

"So not only will it be more expensive to improve listed, charitable buildings because of the withdrawal of the zero rating for approved alterations, it will also become more expensive to make them energy-efficient."