SMEs will be bracing themselves as Tax may rise from 17.5% to 20% under the new Conservative Government which could lead to 7,500 jobs being lost in the housing sector. Economists have predicted that the new Conservative Prime Minister David Cameron and his new Coalition Government will have to raise VAT in its upcoming budget.
The possible increase has caused worry amongst small to medium builders who depend on the domestic repair and maintenance sector.
Richard Diment, director general of the Federation of Master Builders, said: “The industry needs a decision like this like it needs a hole in the head. We commissioned some research by Experion in February and it showed that if VAT rose by 2.5 percentage points it would decrease demand by 2% in the housing repair and maintenance sector and cost around 7,500 jobs.
The caveat is that our industry needs sound public finances, so what we believe is that the tool the government should use is varying rates of VAT for different areas. We would argue that with the fragility of the construction industry it would benefit from a special reduced rate.”
Michael Ankers, chief executive of the Construction Products Association, said: “We would like to see a reduced rate for housing repair and maintenance, but in the current climate it seems unlikely.
We have discussed it with the Treasury in the past and they said, ‘So your want is to give people a lower rate of VAT for building a swimming pool? That’s how it would be seen.” Instead we’re focusing on sustainable products. There is already a list of those with a 5% rate of VAT and we want to update that list.”
The NFB which represents 1,300 small and medium sized contractors said increasing VAT will give “cash in hand cowboys” a much easier time of things and simply make the respectable taxpaying contractors suffer.
NFB Chief Executive Julia Evans said: “We have campaigned for many years to lower the VAT rate on domestic construction work to five per cent in order to close the cost gap that is exploited by cash-in-hand cowboy builders at the expense of reputable taxpaying businesses.
Increasing VAT will simply exacerbate the problem and inevitably drive more homeowners into the arms of rogue traders.”
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