The Empty Homes Agency has been talking about the inequity of VAT rates on building for most of its 14 year existence. But now the issue is urgent. The government has a unique one-off opportunity to harmonise VAT rates, but the window closes at the end of the month.
VAT is currently charged at the standard rate of 17.5% on refurbishment materials and labour, but zero rated for new-build homes. The rules mean that decisions on whether to return empty homes to use, or build new homes instead are skewed. Refurbishment of many empty homes that would otherwise be cost effective is rendered too expensive when the VAT is added. Our position has always been that there should be harmonisation of VAT rates between new-build and refurbishment. Rates have been harmonised in France and bizarrely in the Isle of Mann with no apparent ill effects on the economy.
The UK government did make some welcome changes a few years ago for long term empty homes, but the issue of harmonisation remains. The government response has always been that EU rules don’t allow reduction of VAT. Historically no doubt true. But in a recent ruling the 25 EU member states agreed to allow lower VAT rates on repair, maintenance and improvement work until 2010. Member states have until 31 March to opt in or out of these new arrangements. Signs are that the government will opt out, but who knows, they might be persuadable.
The Federation of Master Builders (FMB) have started an on-line petition. Ian Davis, director general of the FMB, said: "When the other European nations decided to enjoy the full benefits and sign up, the UK government said the Isle of Man could have a reduced rate of VAT but the rest of the UK could not. Why should we miss out again? We have until 31st March to tell Gordon Brown what it is we want him to do for UK homeowners and the construction industry. If we do not, we will literally pay the price for years to come."
If you agree sign the FMB petition at http://www.cutthevat.co.uk/