Posted: 20 May 2009
Issue: Online only
Categories: Update, News, Tax adviser, Government, Taxable Supplies, VAT

Lower rate would encourage more trade, says FSB

Small firms in the construction sector are calling for a lower VAT rate on the supply of services and building materials for the purpose of residential renovations.

The newly released results of a survey by the Federation of Small Businesses (FSB) show that more than half (59%) of respondents said their trade had decreased in the past six months, and over a third (37%) were worried that their financial prospects for the future were poor.

The firms identified the 15% VAT rate charged on renovating homes as a serious concern because, they said, it prevents potential customers from hiring the businesses’ services in new building projects.

The FSB is now working with the Federation of Master Builders on a campaign calling for the rate to be lowered to a flat rate of 5% – to match that on conversions of non-residential buildings – which the organisations believe will provide homeowners with the incentive to spend money with small firms in the construction industry.

The FSB’s national policy chairman, John Walker, said: ‘Confidence in the smaller building projects around the country has dropped to a low.

‘Lowering the VAT rate on home renovation projects will… 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.’

The demand for a lower VAT rate on home renovations is a ‘hot topic, which crops up regularly’, according to John Crawford, managing director of The VAT Consultancy, who said he would endorse such a measure.

‘In the current economic climate, most homeowners are having to renovate their existing properties rather than buy new ones, so a lower VAT rate seems a great way of giving work to firms that would otherwise struggle,’ he added.

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