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VAT On New Homes

AN EU plan to slap VAT on new homes will send prices soaring, experts have warned.

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.


“Most housebuilders 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.”



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