Scottish housing minister calls for reduced VAT

Scottish housing minister, Kevin Stewart, is calling for the UK Government to bring the VAT charge for construction work conducted on existing buildings down from 20% to 5%.

In a letter addressed to chancellor of the exchequer, Rishi Sunak, Stewart requested that the VAT change be made as a result of the exceptional circumstances faced by the construction industry during the Covid-19 pandemic.

In his letter to Sunak, Stewart pressed that, according to industry partners, reduced VAT could be the most significant single step that could be taken to boost recovery in the domestic construction sector.

Furthermore, Stewart laid out the benefits that the reduced VAT charge could bring the industry:

1. A reduction in the cost of such work would undoubtedly encourage and enable domestic investment (which can be undertaken safely under well-developed safe operating practices which have been developed and adopted by industry) at a time when many households are reluctant to invest due to financial uncertainty.

2. The pandemic is clearly bringing major changes in our working and home lives and existing buildings need to be adapted in order to support these new patterns of behaviour. Without this we risk losing buildings that could have been re-purposed and may well force people to work in unsatisfactory conditions at home. A reduction in VAT would significantly increase building flexibility and also send a clear signal that Government is actively responding to these changing patterns.

3. In responding to the climate crisis it is essential that we make best use of existing buildings and the current favourable VAT treatment for new buildings is a perverse incentive in this respect. Making our existing buildings as heat and energy efficient as possible will be critical to meeting our net zero carbon emissions in the future and a reduction in VAT would undoubtedly incentivise such investment.

Stewart did acknowledge that although many Scottish ministers have made such requests in recent times, he hopes for a positive response in the interests of a sector that plays such a crucial economic role.