FSB calls for a five per cent flat tax rate on home renovations

Small firms in the construction sector are calling for a lower VAT rate on home renovations while struggling against a backdrop of badly decreasing trade, according to a new survey by the Federation of Small Businesses (FSB).

The survey, which canvassed the views of a specialist panel of FSB members in the construction sector, showed that 59 per cent of respondents said their trade had decreased in the last six months and that 37 per cent were concerned their financial prospects for the future were poor.

The lack of demand in the private and public sector was the key factor identified by 49 per cent of small firms as most negatively affecting their business and causing the downward spiral in trade.

Small firms have identified the VAT rate on renovating homes – currently at 15 per cent – as a concern, as it prevents potential customers from hiring their services in new building projects.

The FSB is working with the Federation of Master Builders on a campaign calling for the VAT rate to be lowered to a flat rate of five per cent to give homeowners the incentive to spend and give a boost to the builders and small firms in the construction industry at an already difficult time.

Other concerns about the decrease in trade cited in the survey were the cost of resources (nine per cent) and regulatory burden (12 per cent). Some 53 per cent of firms also said more and more companies had started paying them later over the last six months.

John Walker, National Policy Chairman for the Federation of Small Businesses said:

“Confidence in the smaller building projects around the country has dropped to a low, and people who were thinking of adding an extension to their home, renovating their bathroom or building a garage, should be given the incentive to go ahead. Lowering the VAT rate on home renovation projects will encourage people to spend their money and give a vital kick-start to the important, but currently beleaguered, construction industry. It will also help the Government to meet its carbon emission targets by encouraging green home renovations.

“With more than 300,000 jobs in the sector under threat during the recession, and more than half of smaller construction firms and builders across the UK warning they will have to lay off staff in coming months, the construction industry needs support today.”

Notes to Editors

1. The FSB is the UK’s leading business organisation with over 215,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

2. The construction survey panel has 219 members and 173 completed this survey in April 2009.

3. The Federation of Small Businesses has joined the Cut the VAT Coalition, which believes that reducing VAT from its current rate of 15 per cent to five per cent for all maintenance and home improvement work would help the Government achieve its target of cutting carbon emissions by 80 per cent by 2050. It would also benefit millions of UK homeowners by getting rid of cowboy builders, helping those who cannot afford vital repairs to their homes, bringing our empty properties back into use and protecting the countryside. The Cut the VAT Coalition is made up of 20 varied organisations including The Association of Plumbing and Heating Contractors (APHC), The Bathroom Manufacturers Association, The Countryside Alliance, The Country Land and Business Association (CLA), Clay Roof Tile Council, The Civic Trust, The Empty Homes Agency, The Federation of Master Builders (FMB), House Beautiful, The Listed and Period Owners Group (LPOG), The National Home Improvement Council (NHIC),The National Landlords Association (NLA), The National Trust, The Royal Institute of British Architects (RIBA), The Royal Institution of Chartered Surveyors (RICS), The Theatres Trust, The Thatched Owners Group (TOG), Town and Country Planning Association (TCPA) and the Tax Payers Alliance (TPA). For more information on Cut the VAT please visit: http://www.cutthevat.co.uk/

4. The Federation of Small Businesses is also working with a coalition of organisations from within the construction sector to support the Get Britain Building campaign. www.getbritainbuilding.org.

Contacts

Stephen Alambritis: 020 7592 8112 / 07788 422155
Sophie Kummer: 020 7592 8128 / 07917628998
Prue Watson 020 7592 8121 / 07825 125695
Marc Shoffman 020 7592 8113 / 07595 067068

For regional FSB contacts please go towww.fsb.org.uk/regions