Experian have carried out independent research to assess whether a reduction in V.A.T rates for housing renovation would boost the UK economy. The report was backed by more than 60 groups to push the three main parties to commit to a V.A.T reduction in their 2015 manifestos.
The report looks at reducing the V.A.T from 20% to 5% on housing renovation and repair and it looks to create significant long term gains in both job creation and economic growth, but as a bonus it is also said that the reduction would actually reduce carbon generation as the majority of home improvements include energy efficient lighting schemes and often high levels of insulation that can exceed the current Building Regulations.
In an effort to reduce increase funds after the 2008 crash, the Government removed the zero VAT rating in October 2012 for approved alterations to Protected Buildings (Either a Listed Building or a Scheduled Monument). Until this point the repair and maintenance of these buildings were standard VAT rated with only approved alterations (ie. works that required and had the relevant listed building consent in place) being zero rated.
So could this be a return of this allowance? Well, certainly the VAT on any building project is not usually insignificant, for all but the smallest of ventures so a 75% reduction in that cost would certainly be welcomed by all in the building trade.
Take an example of a house purchase, but it’s a project. You don’t have the money to extend the property right away to create your dream home, but it needs some serious TLC and quick! So lets say that you’re looking to stay in the house for 20 years plus and therefore the more you do up front, the cheaper and healthier it will be to live in. You want to put external insulation on the walls of the property and add blown cavity wall insulation. The roof is in need of repair as it’s showing some leaks in the loft, so you decide to have it fully stripped back with new breathable roofing felt added and whilst you’re there, you may as well heavily insulate it and create a warm roof. By the end of all of this work you’ve got a total bill of £20,000, the VAT on this at the normal 20% would be £4000, change that down to only 5% and you’re looking at £21,000 rather than £24,000. It’s not small change and that £3000 that you would have saved can now go towards that boyhood dream……….. 🙂