EU decision gives green light for rate cut on repairs and maintenance

European finance ministers have voted to allow EU member states to charge VAT at 5% on home maintenance and repairs.

The news has been welcomed by organisations connected to the construction and property sectors as a way of helping their members survive the recession. At present eight building firms are going bust each day according to PricewaterhouseCoopers, and the Royal Institution of Chartered Surveyors (RICS) predicts that 300 000 construction jobs will be lost during the course of the recession.

Brian Berry, director of external affairs at the Federation of Master Builders (FMB) said: “News that the UK government now has the option to reduce VAT to 5% on home maintenance and repairs is very exciting as it can 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 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. All we need now is for the UK government to act quickly and decisively.”

Martin Wade, head of commercial contracts and legal at the Electrical Contractors' Association (ECA) said: "This decision is very opportune in the current economic climate as it will remove the incentive for consumers to use cowboy tradesmen and increase work for legitimate and competent contractors.

"I hope any VAT reduction would extend to home improvements, including energy efficient measures, thereby contributing to the national sustainability drive. It will undoubtedly help smaller contractors to ride out the storm and because many of them employ apprentices it will also help to maintain our threatened skills base."