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The Federation of Master Builders has urged the Chancellor, Gordon Brown, to address in his Pre-Budget Report the Government-caused distortions affecting the construction industry. The Chancellor is due to publish his report on 27th November.
The Federation, representing some 13,000 building companies, has called for an end to Government encouragement to use cash-in-hand cowboy builders due to the high rate of VAT levied on the repair of domestic buildings and for a thorough review of the ill-conceived Construction Industry Scheme. It is also calling for stamp duty thresholds to be raised to £100,000, tax credits of more than 100% to encourage training and for capital allowances on commercial buildings.
In it's representation to the Chancellor, the Federation underlines the clear case for reducing the rate of VAT charged on the repair of domestic buildings to 5%. The current punitive rate of 17.5% encourages customers to avoid paying the tax by seeking cash-in-hand, no-questions-asked rogue traders to the detriment of registered professional builders. Ian Davis, Director General of the Federation of Master Builders said:
"The Government's failure to address this central issue of VAT encourages customers to seek a cash-in-hand 17.5% discount. The result is a booming black economy that loses the Treasury some £ billions in tax evasion. A VAT rate of 5% would do much to limit the attractions of using a rogue trader."
Other changes to VAT called for by the Federation include zero-rating accommodation used for working from home as well as zero-rating building works to improve disabled access. Calling for the exemption limit on stamp duty to be increased to £100,00, the Federation believes that given the rise in the cost of homes the current limit of £60,000 is too low.
"Raising the threshold would provide relief that could rightly be claimed to be targeted at the many rather than then few," said Mr Davis.
The amended Construction Industry Scheme has severely distorted the labour market in the construction industry. It has reduced the availability of skilled tradesmen as many have opted to work for themselves or have shifted into the black economy - often in direct competition to those companies for whom they have previously worked.
"For many building firms the Construction Industry Scheme is proving to have serious flaws," said Mr Davis. "It is cumbersome and complex to operate and like all extreme statutes it has defeated the purpose for which it was introduced."
The Federation is also concerned by the lack of industry training and believes that the Government could do much to encourage more training by providing tax credits at more than 100% for payment of Construction Industry Training Board levies and other recognised suppliers of training.
"The Government has told us all about the need for a better trained workforce. Providing tax credits for training gives them the opportunity to achieve their objectives," said Mr Davis.
He continued:
"The Budget offers the Government a real opportunity to correct the tax distortions that benefit the rogue trader to the detriment of the professional builder. We hope that Gordon Brown makes a commitment in his Pre-Budget Report to end the distortion and create a level playing field."
First posted: 15 November 2001. Last modified: 15 November 2001.
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