Vat And Buildings

Issue 64

They say that death and taxes are the only two certainties in life. I am sure there are a few more but this quote helps emphasise the impact of central taxation on our daily lives.

Before we forget, I am an Architect and I have

some strong views on why this subject matters.

We live in challenging times – times when the

Chancellor Rishi Sunak will no doubt be looking to

amend taxation to pay for the costs of the last six

months’ pandemic.

Personally, I would advocate some changes to

stimulate the building economy. The construction

industry which employs 2.7m in the UK is a fast

way to inject energy into the economy.

We have several peculiar tax rules – in particular,

the rules on VAT on building works, which never

seem consistent.

A person building a new house can claim back VAT

on the build, (not on the consultants’ fees) and

effectively build at zero rate, whereas a person

converting a building must pay VAT at 20%.

I have commented before of the unfairness of this

and the lack of incentivisation within the system

for recycling and reusing our building stock.

The rules become even more confusing on

renewables. Over the last few years large numbers

of people have installed PV panels, solar thermal,

and insulation. For green systems, taxation was set

at 5% VAT, which was a good incentive for people

to invest and do their bit for energy conservation.

But then this changed last year and now 20% is

applied to green systems – hardly encouraging

people to make the investment in new energy. To

make matters worse you only pay 5% when buying

coal for your fire, a fossil fuel. It doesn’t make any


So again, we could encourage people to invest in

home improvements or install energy efficient

systems by reintroducing lower rates of VAT.

I wrote to the energy minster recently and got a

long, complicated response, blaming this all on

Europe and it being a difficult situation. I replied,

noting that as we are coming out of Europe then

surely this would simplify matters and allow some

changes for the near future. Sadly, no response.

We also used to charge 5% VAT on listed buildings

(up to 2012). Listed buildings are by their very

nature our most precious assets and require

greater levels of repair, care, and cost. We have

about 500,000 in the UK. So, should we not give

our owners of these buildings a reduced level

of taxation to allow greater investment in our

heritage? If we do not look after them, they will


I would advocate zero VAT on grade 1 listing and a

5% levy on grade 2* and grade 2.

The examples I have given are all areas where I

believe that a reduced rate of VAT could kickstart

investment in different sectors of the construction

industry. I recognise that central government will

be under pressure to raise revenues, but some

targeted reductions can encourage growth and

activity at a time when we really need it.

I am not an economist or a politician, but I do

understand the wider pressures of today’s society

here in the North East and further afield, when

often the simplest changes can be the most


The construction industry has the capacity to help

the wider economy quickly, so give the industry the

opportunity to make a difference.

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