
By Sarah O'Grady
Brussels has quietly issued a consultation document that proposes scrapping the current zero VAT rating.
The
move to charge the full 20 per cent is part of a plan to standardise
tax rates across Europe. It would drive up the average price of a new
home by £48,000 from £238,000 to £286,000 and have a catastrophic impact
on the UK.
The huge
increase would price people out of the market, make it even more
difficult to get a mortgage and bring the building industry to its
knees.
Only
about 130,000 homes were built across Britain last year – a historic
low. Any reduction in numbers would exacerbate the country’s housing
crisis.
Steven Lees,
director of SmartNewHomes, said: “A new 20 per cent tax would have
serious consequences for the market and render useless every initiative
the Government has introduced to help increase the supply of homes.
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Most house builders simply could not absorb this cost and build profitably
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Steven Lees, director of SmartNewHomes
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“Most house builders simply could not absorb this cost and build profitably.
Adding the shortfall on to the asking price would make new homes
uncompetitive and push prices beyond the reach of most buyers.”
Richard
Jones, of the Residential Landlords Association, which sounded the
alert after studying the EU report, said: “Both buyers and landlords
would be badly hit if this were to happen.
“This
consultation has the potential to cause catastrophic damage to the
housing market in the UK and we hope any such moves will be firmly
resisted by the UK Government.”
John
Stewart, of the Home Builders Federation, said: “In the midst of a
housing crisis, with a desperately fragile UK housing market and
historically low house-building rates, any threat to the zero rating of
VAT on new-build homes would be catastrophic. It is vital that the
Government joins with industry to combat any VAT imposition.”
Experts say the EU is proposing to remove the zero
VAT rating from all building materials apart from the ones which offer
the best energy efficiency
and lowest carbon emissions. But Richard Tamayo, of the National
Housebuilding Council, said: “This would have exactly the opposite
effect to that desired by the EU of improving the overall energy
efficiency of the housing stock.”
Andrew
Frankish, of leading broker Mortgage Advice Bureau, said: “Developers
could not afford to absorb an extra cost of this size yet could not pass
a 20 per cent price rise on to buyers because they wouldn’t be able to
afford it, besides which mortgage lenders would flatly refuse to lend.”
A
spokesman for the European Commission said last night: “This is a
consultation pre-empting nothing and looking at VAT in general. There is
no proposal on the table.
“Any change would need the UK Government’s approval to become law.”
And
there was doubt yesterday that the Government would ever agree to
change the tax-exempt status of new homes. A spokesman for the Treasury
said: “The UK Government will not change the VAT zero-rating of
new-build homes.”
Replies to the EU consultation document must be received by January 4 next year.