Guest blog VAT are you talking about
Wednesday, February 05, 2014 by Ed Mead
VAT are you talking about…
Douglas and Gordon have just handed you the keys to your new purchase-a house in need of “a little”TLC. You have sent a huge cheque for stamp duty to the revenue, (quietly wondering why a ‘mansion tax’ needs to be considered on top of this…) You then call in your local architect. His fees are not cheap; building costs at £300 per square foot underground and £200 above ground all add up. And then comes the sucker punch: it is ALL liable for VAT at 20%.
For a fleeting moment these hitherto law abiding citizens consider slipping Breaking Bad style into the black economy. After a couple of sweaty sleepless nights this is rejected, and the entire scheme is scaled back, and non-essentials such as energy upgrades, solar panels and photovoltaics are amongst the first casualties.
Now, given that 29% of the country’s energy consumption is domestic, this seems like a lost opportunity to reduce our usage and hence our carbon emissions.
To add insult to injury, the canny homeowner will then realise that knocking their house down and rebuilding puts them at 0% VAT, but also destroys a perfectly good property and vast amounts of embodied energy in building material is sent to landfill.
New standards of construction to achieve energy savings become live in April this year. Given that there are about 23 million existing dwellings in England, with new builds only averaging about 125,000 per annum (0.6%), having an energy strategy essentially for new builds, whilst penalising refurbishment is nonsense, and at best political posturing.
Of these 23 million, precisely 656 took up the much heralded ‘Green deal’. Green crap indeed…!
New builds of course are VAT-able at 0%, so there is in effect a government subsidy to destroy farmland and greenbelt, whilst disused buildings rot away.
A flat rate of 5% VAT on refurbishment construction costs might drop revenues in the short term, but the masses of work created would soon offset this. As a kick-start for the construction industry and getting us closer to our long-term energy aim; it’s a win-win. It could be offset in a n equal 5% being levied on new builds. Such a move is supported by the RIBA and many leading construction industry voices agree.
The volume house builders will of course squeal via their lobbyists, but they could take this as a positive and move into refurbishment, and with 23 million homes to go on, they could stop moaning about ‘land supply’.
Oh – and listed buildings – until 0% is put on all repairs and approved works, just don’t buy them. Ever!
Ian Hogarth RIBA