This month's Looking Externally is devoted to one subject - VAT and, in particular, the campaign to reduce VAT on domestic RMI work from the current rate of 17.5 per cent to 5 per cent.
FMB leads campaign to cut the VAT
The Federation of Master Builders has led a strong campaign through 2002 to cut UK VAT on domestic repair, maintenance and improvement work to 5 per cent.
We have been successful in both Europe and the UK in making the case that a cut in VAT would be good for the consumer, improve the quality of the housing stock and cut the cowboys out of the market We have now made those arguments in our Budget submission directly to the Chancellor to convince him of the need to reduce VAT on domestic RMI work to 5 per cent.
The Budget
However, as Budget day itself approaches, the FMB needs your assistance to make those arguments again, but at a political level. We'd like you all to write to your local MPs, asking them to press our case with the Chancellor.
What have we achieved up to now?
In the UK, the FMB and others have convinced the DTI of the industry's case. This prompted the Construction Minister, Brian Wilson, to establish a joint working group with Industry, DTI, and Treasury representatives to look into how the case for the 5 per cent VAT rate can best be made.
In Brussels, through its membership of the European Builders Confederation (EBC), the FMB was instrumental in persuading the European Commission to prolong the experiment on reduced rates of VAT for a further year. This will give valuable extra time to show that the cut in VAT helps consumers, business and the Government.
What is happening in Europe?
The experimental reduction in VAT on labour intensive services has been taken up by a number of countries including France and the Netherlands. The European Commission recently reported on the results of those experiments, which appear to be broadly positive both in the creation of jobs and in the reduction of the activities of rogue traders.
The results also show that consumers benefited from reduced prices and better quality work. Reputable builders benefited from a lower level of cowboy competition and the quality of the housing stock improved.
Through EBC, the FMB will be working with the European Commission on amendments to the Sixth VAT Directive to make the experimental reduction in VAT on domestic building work permanent. This will sweep away any European obstacles to the reduced rate of VAT in the UK.
The UK Government should therefore embrace the reduction in VAT on domestic RMI work and pass the benefits on to UK builders and consumers.
How can you help?
The Chancellor, Gordon Brown, needs to be personally persuaded of the political case for change.
So write to your MP, tell him how strongly you feel about this and how cowboy builders damage your business.
We may not cut the VAT in this Budget, but if we keep the pressure on we should get there in the end.
For this month's news story on the FMB's VAT campaign, click here.
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