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Rok lobbies for VAT tax cut on repairs

Rok chief executive Garvis Snook has written to chancellor Alistair Darling asking him to cut VAT on property repairs to 5 per cent to protect contractor jobs.

Rok is running a Repairing Britain campaign, which calls for tax cuts on repair work, in line with the VAT exemption on building new properties.

The fi rm commissioned Teesside University Business School to investigate the economic  effect of a cut in tax, and Mr Snook sent the fi ndings to Mr Darling.

The detailed report, prepared by Teesside University Business School, presents a breakdown of the net losses to HM Revenue and Customs of reducing VAT.

It compares these with the estimated costs arising should the predicted 300,000 construction workers who will have lost their jobs during the recession remain unemployed.

The study concludes that the VAT reduction can be justifi ed because of the “tens of thousands of construction jobs it would save” and the improvement it would bring in the quality and energy effi ciency of the UK housing stock.

The business school found that reducing VAT on repairs to 5 per cent would cost the Treasury £2.6 billion in lost tax revenue. But it found that the cut would also increase demand for property repair services by 10 per cent. It calculated that the loss of 100,000 construction jobs would cost the taxpayer £1.2bn due to unemployment benefi ts and loss
of tax.

Also calculated is the effect of equalising the rate of VAT charged on new build projects and refurbishments because, at present, new buildings do not attract any VAT whereas the tax is levied at the full prevailing rate on repairs and renovations.

However, such a move is seen as likely to be popular and might slow down recovery. The Teesside University report also concluded that based on experience of the shorter and shallower recession of the 1990s, the sector’s job losses will result in a future skills shortage and consequent infl ationary wage rises as the recovery takes hold.

It said VAT reduction on repairs will reduce the black economy and allow a better use of the existing stock of buildings to revitalise communities. Mr Snook said: “The Teesside University report supports the campaign’s assertion that a VAT cut on repairs would bring  down unemployment, protect skills and apprentice programmes, and improve the quality and effi ciency of UK housing stock.”

“We welcome the fi ndings of this report which give validity to our arguments that a change in tax on property repairs could be cash neutral. The report supports our belief that a
tax cut could keep more people in work at a time of rising unemployment and help the country return to fi nancial stability and growth.”

The Repairing Britain campaign was created to boost the UK economy by stimulating the  onstruction industry and encouraging the public and local authorities to take an interest in the maintenance of their homes and community buildings.

It is spearheaded by Rok and supported by a range of industryrelated businesses and organisations.