The Push for Dropping VAT on Home Improvements to 5% is on!
Tuesday, May 26th, 2009
Back in March, European Finance Ministers voted to allow EU Member States to reduce the VAT rate to 5% on home maintenance and repairs. This marked a victory of sorts for the ‘Cut the VAT‘ coalition who have been campaigning to get the VAT rate for maintenance and repair work reduced to 5%.
At the time, Brian Berry (Director of External Affairs at the Federation of Master Builders) said:
“News that the UK Government now has the option to reduce VAT to five percent on home maintenance and repairs is very exciting as it cannot no longer blame Brussels for not being able to take action.
If the UK Government goes ahead and implements the VAT cut it could mean that many more small building firms will be able to stay in business.
The EU experiment where VAT has already been cut in parts of Europe already proves that a cut will increase Treasury revenue as well having many social benefits such as creating a greener, more energy efficient housing stock and tackling the growing issue of fuel poverty.”
On 20th May, the Federation of Small Businesses added their backing to the campaign following a survey of their members which revealed that 59% of the respondents reported a decrease in business, and 37% were concerned about their financial prospects in the future.
49% of respondents highlighted that the lack of demand in the private and public sector was negatively affecting their business.
As a result the FSB are now working with the FMB in order to campaign for VAT on home improvement to be lowered to 5%.
John Walker (National Policy Chairman for the FSB) said:
“Confidence in the smaller building projects around the country has dropped to a low, and people who were thinking of adding an extension to their home, renovating their bathroom or building a garage, should be given the incentive to go ahead. Lowering the VAT rate on home renovation projects will encourage people to spend their money and give a vital kick-start to the important, but currently beleaguered, construction industry. It will also help the Government to meet its carbon emission targets by encouraging green home renovations.
With more than 300,000 jobs in the sector under threat during the recession, and more than half of smaller construction firms and builders across the UK warning they will have to lay off staff in coming months, the construction industry needs support today.”
To find out more about the benefits of cutting VAT on Home Improvements why not visit the Cut the VAT website, and add your support to the campaign. The benefits of a reduced rate of VAT include:
- Economic Benefits - increased employment, and a potential increase in actual tax take, as despite the VAT rate decrease, the number of projects undertaken should increase.
- Reduce the number of rogue builders - many ‘cowboys’ flourish by evading VAT altogether thereby offering customers cheaper deals; a reduced rate of VAT would level the playing field and allow reputable traders to compete with their pricing.
- Reduce the number of empty homes - surprisingly there are over 700,000 empty homes in England alone; but the cost of repairing them to make them fit for habitation is too high - a reduction in VAT would help alleviate this.
- Reduce the number of those living in substandard housing as people will be more readily able to afford repairs.
- Protect the countryside - by making home repair and improvement work more affordable, it would encourage the use of existing structures rather than continuing the development of greenbelt land.
- Stop the destruction of decent existing buildings - the difference between having to pay 17.5% VAT on building repair work and not having to pay any VAT on new buildings can lead to perfectly good existing structures being demolished and then rebuilt for tax reasons.
- Increase the number of zero-carbon homes - The most cost-effective way of increasing the energy efficiency of buildings is when they undergo major renovation, however currently the VAT rates are heavily weighted in favour of demolition and new build as opposed to refurbishment - 0% VAT on new homes versus 17.5% on the renovation and repair of existing homes.
- Help tackle fuel poverty - the number of people living in fuel poverty in this country has doubled since 2004. If the VAT was cut on energy efficient home improvements, more people would be able to afford to make these improvements, and save money on their heating bills.
- Help preserve our national heritage - Britain’s national heritage is threatened by the VAT burden that repairs and maintenance work carries. Buildings of significant historical interest will continue to be lost to modern developments unless the costs of their maintenance can be reduced.
- Allow disabled people to have essential renovations made to their homes - charging VAT on this building work can reduce the available grant by up to 17.5 per cent (reducing the current maximum grant of £30,000 to £24,750).
Image credit - Cut the VAT Coalition.








