EU approval of 5% VAT cut – the industry responds

News that the European Union has given the UK government the go-ahead to reduce VAT on home improvements to 5% has been welcomed by industry groups and trade bodies.

The main architecture and construction trade bodies have been lobbying the government for some years to reduce the tax burden on the industry by cutting VAT on private refurbs.

The EU’s decision to allow its member states to set their own VAT rates on such improvements has been widely heralded as a significant move towards a lower tax threshold.

Here is a selection of reactions from industry bodies:

Brian Berry, director of external affairs at the Federation of Master Builders

News that the UK government now has the option to reduce VAT to 5% on home maintenance and repairs is very exciting as it cannot no longer blame Brussels for not being able to take action. If the government goes ahead and implements the VAT cut it could mean that many more small building firms will be able to stay in business.

Sunand Prasad, president of the Royal Institute of British Architects

This announcement is potentially excellent news marking a significant step forward in our campaign to cut remissions and help the profession and the industry work through the recession, while also reducing fuel poverty. The economic situation is worsening by the day and is having a profound impact on architects who are the hardest hit of the professions. Architects can have a real role in this work, working with homeowners and housing associations on how to refurbish their homes. There needs to be a large refurbishment programme to tackle climate change and there is no better time to do this than now.

James Rowlands, policy project manager at the RICS

This could provide a glimmer of hope for the construction industry in the UK. Now approval has been given at an EU level, it is essential that the chancellor acts quickly to reduce the VAT rate in the UK. A reduced rate of 5% will help make energy efficiency improvements to homes cheaper, bring empty homes up to a habitable standard and boost activity in the construction sector which has been badly hit by economic conditions.

Kurt Calder, communications director, the National Federation of Builders

A reduction in VAT on domestic repair and maintenance to 5% would remove the competitive advantage of the black economy builders, raise standards (including health and safety) and, by driving the cowboys out of this market, would bring more companies within the tax threshold thereby increasing revenue to the Treasury - a win/win/win solution.