Dave Thompson MSP

SKYE, Lochaber and Badenoch MSP Dave Thompson has joined a campaign to press Westminster for a reduction in the amount of VAT levied on building repairs and maintenance.

Proponents of a reduction in the rate of VAT for such a service from 20 per cent to five per cent state that this would give a boost to a sector of the economy which has experienced one of the largest impacts following the recent financial crisis. Mr Thompson has added his support to a Scottish parliament motion calling for the change from fellow Nationalist MSP Kevin Stewart (Aberdeen Central).

Mr Thompson said: “Hard-pressed building firms are doing what they can in the current climate to bring in extra work so they can avoid the need to lay off staff.

“One way it is possible to bring in extra business is to attract maintenance, repair and improvement contracts. At present if someone wants to employ a builder to carry out £10,000 of work, on top of that they will be charged £2,000 in VAT and that significant extra cost could be enough to dissuade potential clients from commissioning such work.

“Independent research has shown that a cut in VAT of the size proposed could help create more than 3,000 construction jobs throughout Scotland within a decade.

“Earlier this week, we heard evidence that in the Highlands we currently have just over 200 unemployed tradesmen and I believe that the relatively small step of reducing VAT on this small aspect of construction work would provide the boost the sector needs to create work for these people.

“Therefore I call on Danny Alexander, a fellow Highland politician who is Chief Secretary to the Treasury, to use his influence to join us in pressing for this change.

Mr Thompson’s call was echoed by Willie Gray, managing director of William Gray Construction Ltd. in Inverness.

“Under the current VAT system, when you are refurbishing a building you have to be confident it will deliver an increase in value of 120 per cent of the construction cost because of the addition of 20 per cent on top of the bill for the VAT man,” said Mr Gray.

“We have long lobbied for a reduction from 20 per cent to five per cent and I believe this change could encourage more owners of existing homes and commercial premises to improve their properties.

“This increase in orders would obviously lead to an increase in employment at a time when a slump in other contracts is increasing pressure on some firms to lay people off.

Kevin Stewart introduced his motion to the Scottish Parliament after hearing arguments from the Cut the VAT Coalition which is advocating the step at a UK level. This grouping comprises 19 organisations such as the Federation of Master Builders Scotland, the Federation of Small Businesses and the Royal Institution of Chartered Surveyors.

Note:

Kevin Stewart’s motion:

*S4M-00470 Kevin Stewart: Cut VAT on Housing Improvements—
That the Parliament recognises that many small construction firms are suffering because of the economic downturn; notes that new house building is VAT exempt, but that housing extensions and improvements are not, and calls on the UK Government to consider cutting or abolishing VAT on housing improvements and extensions to allow for the security and survival of Scotland’s small construction companies.