Select Committee on Culture, Media and Sport Written Evidence


Supplementary memorandum submitted by Heritage Link

VAT ON REPAIRS TO OLDER BUILDINGS

  On behalf of Heritage Link, which represents 82 organisations actively involved in the conservation of Britain's unique historic heritage, I write to urge you to take advantage of the current opportunity for the United Kingdom to apply to the EU Commission to exercise an option to introduce a reduced rate of VAT on the labour input of renovation and repair work to private dwellings.

  This application must be made by the end of this month, in accordance with the terms of the recent agreement reached by EU Finance Ministers to maintain Annex K of the EU Sixth VAT Directive until the end of 2010.

  An application by the UK would not commit the Government to exercising the option to introduce a reduced rate of VAT, but it would have the possibility to take it up at any time in the next five years. However, a decision not to apply would close off this option, possibly indefinitely if Annex K is not renewed again.

  Moreover, an application now would ensure that the decision on setting the rate of VAT remained with the UK; not to apply would cede the decision to the EU by default.

SUBSTANTIVE BENEFITS

  The substantive benefits of the UK taking a decision not only to apply but to introduce a reduction in VAT, say to 5%, on the renovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply, are several.

  Such a reduction in VAT would remove the distortion that currently exists in the housing market in that an additional cost is currently placed on renovation of existing buildings compared with new build; this adds costs, overall, to the provision of additional housing to meet current and future need. Removing this distortion would be consistent with the objective of reducing housing costs, an objective that was central to the invitation to Kate Barker to produce her Report on Housing Supply.

  The current anomaly, in which repairs incur a 17.5% rate of VAT, is a disincentive to timely maintenance, which in the long term adds cost. It is also a brake on the re-use of vacant and under-used buildings.

  Conversely a reduced rate would help the heritage sector to address the cumulative backlog of repairs needed to historic buildings and equip itself to make a full contribution to the economic and cultural health of the nation. The value of reducing the impact of VAT on listed places of worship has already been recognised in the measures taken earlier by the Treasury. As the Olympics approach and the potential for inward tourism to Britain—not only London—increases, this need to bring our heritage up to a good standard will grow until it becomes central to the enduring success of the Olympics in this country.

  Greater economic activity in repair and renovation will support employment and the retention of conservation skills needed in the longer term. Greater activity also means higher income tax returns.

  Also important is the fillip that renovation of the built heritage often gives to local communities and to regeneration. Building Preservation Trusts have a good record of initiating regeneration schemes with heritage buildings at their core. However, their scope to do this is limited by the costs of such initiatives. A reduction in VAT would enable them to take on more schemes, thus paving the way for accompanying private sector investment in refurbishment of neighbouring housing.

  The greater scope for these initiatives would counter the resistance that sometimes exists to the preservation of historic buildings in the centre of potential regeneration projects. Historic buildings would be much less likely to be seen as a block to regeneration on the grounds of its cost; and as a result more projects will become possible.

  For all these reasons Heritage Link urges you to take this opportunity, which would be a win-win for heritage, regeneration and the wider national economy.


2 March 2006






 
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