George Osborne has been urged to slash the VAT rate for the building industry when he announces his 2013 Budget next Wednesday.
Alan Pearce, VAT partner at accountants Blick Rothenberg, says the Chancellor should cut the rate from 20 per cent to 5 per cent on housing repairs and refurbishments.
"If VAT on services such as property maintenance, repairs, refurbishment, alterations and extensions was reduced by 15 per cent, for say two years, it would give a significant boost to the building and construction industry and kick-start this sector into growth and recovery," Mr Pearce said.
"There is no problem from an EU perspective as the 5 per cent rate is allowable for residential property under existing EU law and therefore the change could be made very quickly. Construction firms and self- employed builders would be given a huge boost that should stimulate employment." The move would lead to a cost in lost revenue to the Government, reckoned to be in the region of £2.2bn, but it would be made up by getting people back to work and businesses operating again in the struggling industry.
There would also be the bonus of improving the UK's crumbling housing stock, which is not being repaired and maintained simply because people do not have the money for it.
Mr Pearce said: "If property owners and tenants had a two-year window to use a saving of 15 per cent, many would consider carrying out essential maintenance or having an extension built."
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