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Hiring out your church premises

First published on this website in February 2012 and last updated in January 2014.

Words: 9200
Size: 292 kB
Categories: Administration

Synopsis

Here is detailed advice on how to go about letting your church buildings out for others to use.  There are nine sections which cover

  • Clarify purpose and vision
  • Assess the spaces available
  • Identify your target users
  • Fix the pricing structure
  • Take advice on legal details
  • Beware potential problems
  • Serve professionally
  • Set up management and staffing
  • Market your product

This article will be invaluable for any church letting out its premises for the first time or reviewing or extending its present level of lettings.

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To read or download this item, click here: PDF a28.pdf

Comment on this item

Please comment and add to the debate by way of support, disagreement, experience, additional points to make, etc.

This article was updated in January 2014 with additional material to take into account comments received below. Thank you to everyone who gave input.

Thanks, Peter, you raise a different VAT issue from the one made earlier in this list because here you are talking about VAT on the construction of a new building rather than just the idea of trading turnover in a building that has been around for some time. The next update of this article will need a mention of this I can see, but will probably only be able to flag up this one which is certainly complex, as you are discovering. Thanks so much for raising it.

Interesting article. There is an elephant in the room called VAT that isn't really addressed. We have just completed the construction of new church building and zero rated the construction on the basis that the building will be used for a relevant charitable purpose.

We have had loads of enquiries about hiring out the church building and meeting rooms (zumba, scouts, community associations, fitness classes, parties, other local churches etc etc). However, I am concerned that the use of a building for more than 5% for non-charitable purposes could result in a liability for VAT on the whole or a significant proportion of the construction cost. This would be the case for the first 10 years under the capital goods scheme. HMRC guidance does not tell you how to calculate the 5% but puts the onus on the charity to come up with a just and reasonable basis (unlike the previous rules which specified how the 10% could be calculated).

We have been advised to avoid letting to top-down business operations eg franchised ventures and focus on community use.

We are putting together our lettings policy and would really appreciate if anyone has an more experience in this area. I am aware that HMRC is going after a number of village halls and church halls for VAT so I am not sure we can expect HMRC to play fair on this.

Thanks for pointing out this omission about licences, which of course is a huge subject in itself but definitely deserves a mention. I will include this in the next update due by January 2014. Really helpful to hear of your experiences, Abigail.

I have just scanned through this document and it makes some good points. We have 2 church buildings and a range of rooms that are let out to a number of regular people as well as the usual one-off bookings. One thing not mentioned is the range of licences that need to be considered - a video licence is needed for for any form of film discussion group (we have someone (not church person) who leads a small group discussing films), if CDs are played (at preschool, Sunday school, youth group etc) then a PPL licence is needed and a PRS licence. If you have concerts in church/hall then PRS is needed. The CCLI people supply most of these, but we have discovered this year that because our church hall is in a different building to the church - same curtilage, but separate buildings - they cannot give us a PRS for the hall, that now comes direct from PRS (now PRS and PPL are joint licences provided by PRS) at much greater cost! There is also a limit of 6 concerts a year for the church PRS - any more and again we would have to go direct to PRS. Also there has been a change whereby some groups which hire halls used to have their own PRS (e.g the folk dancing group which hires our hall) no longer have to as it is now the responsibility of the hall to have the right licence. I spent many hours about a year ago trying to get my head round this so think this article should give it a mention. We are also complicated by the fact that we have 2 buildings but one legal entity (we are an LEP with an LEP consitution now). This means some of our licences are able to cover both buildings, but some (PRS and PPL) cannot!

Someone else has commented that they insist on a PAT certificate for any electrical items brought in by hirers. Not a bad idea.

Lots of helpful points being added here - all will be noted for the next update of this article. Thank you for all received so far - keep them coming.

I guess we live in particuarly price-sensitive times just now so we need to watch our tariffs carefully. But beware leaving them as they are for some years and then trying to catch up as people notice big jumps.

On VAT this should not be a problem unless the church has a considerable turnover in trading activities which some may. Thanks, Phil, for all the information provided - delighted someone is doing all the work! Anyone else have input on this?

Business rates should not be a problem but I am picking up that some Councils are now out to get whatever they can and this may become much more of an issue in the future. Any experiences on this from anyone would be helpful.

And on doubling up pack up and set up, fair point and I will add a caveat when I update. Much depends on the type of activity and whether cleaning is necessary inbetween. Thank you, Hilary.

Thank you - this is such a helpful article, coming at a very helpful time for us as we overhaul our bookings policy and the vision behind it. It was reassuring to read though and know we're already doing a lot of things mentioned, and that the remainder are achievable.
One minor tweak I would suggest - pg6 - when bookings are back to back then please don't overlap one group's set up with another's packing away. I have seen arguments and resentments start here because both parties felt pressured. Also remember that the last bit of clearing is usually hoovering up, and this can't be done effectively if someone else is getting things out. And it's never fun starting off in a biscuit-crummy room! It is also worth knowing if you can offer the opprtunity to set up well ahead (ie first thing in the morning for a lunch time booking) if you know there is nothing going on in the interrim. Don't necessarily advertise this, but be ready for the question.

Nice job, John. On lettings forms Stewardship also have some letting form examples and resources for sale. On the business side there may also be implications for VAT threshold, and for rates. These are complex areas, I have been trying to accumulate an understanding of them. To the best of my understanding the issues are as follows, but anyone please correct me, I would love to know more detail. Church buildings are rates free, but once you are trading then I understand they could be potentially liable for rates being applied proportionally? Re VAT all trading contributes to turnover to be checked against VAT threshold unless its zero rated. Room hire per se is zero rated, but if chargeable services are added then they contribute to assessable turnover. Any services which are necessary for the letting and so always included, can be considered zero rated, so if you always have a cleaner and a receptionist then they are not a chargeable service and having them present doesnt alter the zewro rating for the room hire. If you always provide a PA operator for a certain class of hire then that is zero rated. If however PA operator is an extra, then it is VATable. If you do a new or major refurb that gets zero VAT status because you are a charity, then its on condition that business use is less than 10% for the first 10 years. 10% can be by time or space. One of our group of churches was pursued over this (after a multimillion pound development thats a lot of money at stake), but they argued that the trading was majority community use and otherwise merely to offset building costs so was not business use as no profit was generated. In the end the VAT office withdrew their challenge and subsequently in a later budget issued a statement that they would not pursue the 10% rule provided that charity buildings were built in good faith with the purpose of charitable use and there was genuinely no intention at the time of building to subsequently develop substantial business use. In my view this is a grey area where the VAT department havent figured out how to assess the way churches are diversifying their trading activity. Having spoken to various churches most of us seem to keep lettings wrapped into the main accounts, but I dont feel that I have enough of a paper trail to fully justify that, and will be doing some work with Stewardship soon to back up that position. Phil Hicks. Westbourne Grove Church W11

Lots of ideas; and the clear structure makes it easy for the reader to pick and choose the ideas which most suit our resource. thank you for that.

Thank you John for this very comprehensive guide. I'd thought we had a pretty effective arrangement with our Community Hall but I've still picked up loads of good ideas from your article.

Very comprehensive. Just wish we'd had this document when we started hiring out our premises! Am scheduling time to review its contents with our Hospitality manager this month - as there's a few symptoms that we're experiencing that this article highlights the causes. Needless to say, the more attention you pay to setting something up right, the smoother the ride you're going to have.

We've put up our rates up again for this year, and are quickly backtracking as the market has changed and price-competition is the name of the game in the current economic climate. We're also underway with a large restoration project to the building as the wear-and-tear is making us an unattractive venue.

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