Brussels offers landlords a glimmer of hope with proposed cut to VAT on repairs

The commission has proposed that social housing repairs and maintenance be added to its list of activities that qualify for a reduced rate of VAT. But wranglings among member states over the additions leave a huge question mark over whether the list will be enlarged.

The proposal was buried in a government response to an ODPM select committee report on renovation of historic buildings. But it seems that it would apply to repairs of social housing as a whole, not just historic buildings.

The report said: “The current reduced rate list does not include repair and maintenance work but the commission has made proposals to amend the list by specifying the inclusion of the repair and maintenance of social housing.

“If that proposal is agreed, the government will examine the potential costs and benefits of applying a wider relief in the UK, focusing on those measures that offer the best-targeted and most efficient support for its key social objectives.”

If the new list were adopted, the UK government could choose to reduce VAT on repairs and maintenance of registered social landlord housing.

The National Housing Federation has been pressing the government for an abolition of VAT on social housing repairs for several years.

At present the largest RSLs pay millions of pounds in VAT, so the proposed tax reduction of 12% could save the sector huge sums.

Neil Cohen, head of tax at City law firm Trowers and Hamlins, said: “If brought in it will clearly be of real benefit to all RSLs who spend significant amounts on repairs and maintenance of stock.”

A Treasury spokeswoman said: “The review of the reduced-rate provisions is ongoing. But the commission’s proposals and subsequent negotiations have polarised opinion among member states about reduced rates, so it’s not definite that the changes will go through.”