A REDUCTION in VAT on building repairs – as suggested by the Scottish Building Federation – would have welcome benefits beyond those identified in your report (“Booming cash-in-hand costs taxman”, 9 May).
As a householder who has recently tangled with a builder who offered a significantly lower price in exchange for cash, I had to consider whether I would have been encouraging an unfair and illegal practice. In the event, I insisted on the additional price for the privilege of not paying by cash – but the process of such negotiations and decisions is far from painless. There are enough barriers to successful home improvements without added ethical pressures.
The suggested reduction in VAT for home improvements would reduce these pressures and encourage the improvement of our housing stock. In addition, bringing homes up to standard through such improvements or extensions can be expected to reduce the pressure to move house for some people. House prices are overheating and any modest reduction in demand is to be welcomed.
Finally, as is so often the case, I suspect the reduction in tax from such a fall in the VAT rate would be more than made up from an increase in the volume of repairs undertaken and the increased employment (and income tax) which follows.
So the benefits of such a VAT reduction can be expected to include houses in better repair, more employment, a small but welcome reduction in housing demand and greater clarity and incentive for small businesses to stick to the tax laws.
It might even reduce the pressures of difficult last-minute negotiations with tradesmen.
(Cllr) Cameron Rose
RESEARCH published by price comparison website Confused.com shows more than half of Scottish homeowners have paid tradesmen cash-in-hand and see nothing wrong with doing so. Almost half of these payments are made to builders and associated trades.
In reality, the practice means millions lost in tax revenue to the Treasury and many legitimate VAT-registered companies losing business to less reputable cash-in-hand traders.
By far the best way of tackling this problem would be to cut VAT on building repairs and maintenance to 5 per cent. It would erode the cash-in-hand traders’ competitive advantage, boost the construction industry and Treasury coffers at the same time and reduce consumers’ exposure to shoddy or unsafe work carried out by tax-evading rogue traders.
Scottish Building Federation