VAT reform for shoring up UK housing market
This week’s Budget statement will present the Chancellor Philip Hammond with a prime opportunity to address the inequality in VAT between new builds, charged at 0%, and renovations, rated at 20%, according to Carol Peett, managing director of West Wales Property Finders.
Peett suggests that a much fairer solution would be to bring it in line with the 5% VAT rate that is chargeable on renovating a dwelling that has been empty for at least two years.
Her vision is that the current housing shortage could be alleviated by encouraging people to extend their living space, enabling a property suitable for a couple to be converted into one able to house a family.
Peett said: “We have personal experience of the gulf between VAT on a new build and on a renovation.
“When we inherited our traditional Pembrokeshire long house it was in dire need of an overhaul. We were advised that it would be cheaper to knock it down and start again, which would have been sacrilege.
“We bit the bullet and undertook a huge renovation programme incurring 20% VAT but many in our position would make the more rational decision and properties such as ours would be lost to future generations.”