The British construction industry has been pleading unsuccessfully with the government to cut the rate of VAT for some years.
The European Council directives allow member states to cut VAT in some labour-intensive industries to boost employment. The new Isle of Man rate will last for three years, ending in December 2002. Once that period has expired, the Manx government can put a case to the European Commission to extend the period.
The scheme came into operation last month but companies engaged in refurbishment since January of this year will be charged VAT at the lower rate from that date.
The directive can also be used to cut VAT on repair and refurbishment in the UK, although a spokesperson for HM Customs and Excise said the government had no plans to do so.
The spokesperson said: “There are no plans to ask for a similar reduction in the UK. The Isle of Man government wants a reduced rate, we do not. The Isle of Man is a foreign dependency; it is not part of the UK, although it is part of the UK’s VAT system.”
The UK government lobbied Brussels for the reduction on behalf of the island’s government after a request was received from the Manx Treasury.
Federation of Master Builders director-general Ian Davis, whose organisation has asked the government repeatedly to cut VAT in the UK as part of its campaign to outlaw cowboy builders, was stoical about the reduction. Davis said: “We are actually looking for something more sustainable than a temporary measure allowed by the EC directive. But it is interesting that the UK government is happy to lobby Europe to reduce this burden for the Isle of Man and resists doing it for the UK.”
Richard Cockill, the Manx government’s treasury minister, said the measure would stimulate urban and brownfield development and reduce greenfield development.
A spokesperson for the Manx government added that the cut in VAT would also help bona fide builders compete with those in the black economy. He said it would also stimulate employment and training opportunities.
