Chancellor urged to cut VAT on empty homes

LGA press release - 23 March 2009

VAT should be slashed on long term empty homes to bring up to 300,000 properties back into use, council leaders said today.

In a letter to the Chancellor ahead of the budget, Alistair Darling, the Chairman of the Local Government Association, Cllr Margaret Eaton, has called for the introduction of a standard VAT rate of five per cent on the refurbishment of homes that have been empty for six months.

The LGA is calling on the Chancellor to introduce the tax cut in the forthcoming budget statement to stimulate building trade activity during the recession.

VAT is currently cut to five per cent only when a property has been empty for two years. The LGA estimates that by reducing that period to six months, thousands more homes could be brought back into use and the government would benefit from the increased revenue this could generate – effectively making the proposals cost neutral.

In her letter, Cllr Eaton said:

“There are currently over 308,000 long term empty homes in England.  At a time when new-build has all but stopped, when repossessions are on the increase, and when waiting lists for social housing are growing, it is frustrating to see fundamentally sound properties lying empty or falling further into disrepair.

“An extension of the reduced VAT rate to homes which have been empty for six months would usefully stimulate activity and get these properties brought back into use. Councils up and down the country could actively promote this new tax incentive to owners who might well be struggling with renovation costs.”

Cllr Eaton added:

“With millions of people waiting for social housing or unable to get onto the property ladder, it makes no sense to have so many homes sitting idle. Renovating empty homes would boost the building trade, create jobs and reduce social housing waiting lists. This will in turn help the very people who are the most vulnerable during the current economic situation.”