Housing Minister Kevin Stewart has written to the Treasury calling for the tax break on work to remove aluminium composite material (ACM) cladding from high-rise buildings.
The Prime Minister has committed the government to spending about £400 million to pay for councils and housing associations to replace the potentially dangerous material on tower blocks.
However Mr Stewart said those living in privately owned buildings would face significant costs to ensure their homes are safe.
Cladding fuelled the spread of the fire that killed 71 people in the west London block in June last year, and a subsequent safety operation identified hundreds more buildings with similar set-ups.
Mr Stewart said: “We welcome the recent announcement that the UK Government will fund replacement cladding for social high-rise domestic buildings, however that funding will not be extended to owners of private high-rise buildings.
“This means that in order to make their homes safe, individual owners will need to fund the full cost of replacing unsafe combustible cladding.
“These costs run into millions of pounds and are made considerably higher as VAT is payable on this category of repair works. Hundreds of buildings and thousands of individuals across the UK are affected by this.”
He added: “It perturbs me that we find ourselves in a situation where repair work directly linked to the replacement of ACM cladding, in order to ensure the long term fire safety of residents, will ultimately result in additional revenue to HM Treasury.”