Lifeline for builders as UK given option to reduce VAT on maintenance and repairs
The UK is to be given the option to charge VAT on home maintenance and repairs at a reduced rate of 5%, after a ruling by European Union finance chiefs.
The ruling paves the way for the UK government to ease the tax burden on a construction industry badly hit by the recession – allowing architects, builders and surveyors to carry out private refurbishments for a cheaper rate.
Yesterday's decision by the EU Economic and Financial Affairs Council to allow member states to lower VAT on renovation and repair of private dwellings from 17.5% to 5% comes after months of campaigning by trade bodies and MPs.
A 5% VAT rate on home improvements was one of the main points of the Get Britain Building manifesto set up by a coalition of MPs and trade bodies last month. It has also been the focus of a long-running campaign led by the Federation of Master Builders (FMB).
Brian Berry, director of external affairs at the FMB, welcomed the decision as a “victory” for the construction industry.
He 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.”
It remains to be seen whether the government will opt to lower the VAT on home improvements, but such a move would have environmental benefits, increasing green refurbishment and helping the UK fulfil its pledge to lower carbon emissions by 80% by 2050.