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The Federation of Master Builders, representing the UK's small and medium-sized builders, is casting envious eyes across the Channel where the French President, Jacques Chirac, has announced his support for a permanent reduction in the rate of VAT levied on the repair, maintenance and improvement of domestic properties. FMB has continuously lobbied the Government for a similar VAT rate in the UK.
The rate was reduced from 20.6% to 5.5% in September 1999 following representation from the French building industry that such a move was essential for reducing the attractions of the black market, curbing the activities of the cowboy builders and giving legitimate builders the business environment necessary for industry investment and training. The reduction was a temporary experimental measure designed to last until 31st December 2002. In the UK every year home owners, attracted by the promise of a 17.5% VAT-free discount, are swindled out of £3.5 billion by rogue traders. The continuation of this high rate of VAT undermines any of the government's proposed anti-cowboy initiatives, such as the launch of the Quality Mark scheme.
Speaking at a recent conference of the Confédèration de l'Artisant et des Petites Entreprises du Batiment (CAPEB), the French equvilant of the Federation of Master Builders, President Chirac stated:
"The reduction to 5.5% in VAT on renovation work is a good economic decision. It also represents justice, recognising housing as the most basic necessity. I hope that this measure will be made permanent."
His support was welcomed by Jean Lardin, the National President of the CAPEB.
Since its introduction, the French have found that workloads for domestic repair and improvement work have increased. Concerns over reduced taxation revenue have not been realised. The VAT generated from the increased workload has negated the possible revenue downturn from levying a reduced rate. More home owners are happy to pay this reduced rate and get a professional builder rather than take a chance an use a cowboy from the black market economy. In return for a more level playing field, French building firms have not increased their prices and have taken on more staff. These were two conditions which the French government required to be met if the VAT reduction was to be made permanent.
Ian Davis, Director General of FMB, said:
"The evidence from France points unequivocally to the benefits of a reduction in VAT on RMI work. Home owners are encouraged to use a reputable builder to carry out maintenance and repair on their homes thereby improving the national housing stock. VAT-registered builders can offer competitive quotes against non-registered builders. Government benefits from industry investment and a reduction in the black economy.
"We urge the government to take notice of the success of the French VAT reduction and introduce a similar rate in the UK early in the new Parliament."
First posted: 17 July 2001. Last modified: 17 July 2001.
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