Many of us are having to spend more time in our often not-very-cosy homes during this period of self-isolation. So, now seems to be a good time to make the case for the removal of VAT on retrofit building work. This would be an important step that the Government could make to help boost the UK economy in these unsettled times as well as acting on the other very pressing emergency of climate breakdown.
At the moment, we are in the ludicrous position that newbuild build projects have zero VAT but VAT is charged at a rate of 20% on retrofit projects. There are a few exceptions to the rule but generally because of the VAT, build costs are more for retrofit, resulting in a situation where “it is usually cheaper to knock down buildings and build new ones in their place, rather than work with existing structures and retrofit them for new, greener use”.[1} Yet we know that retrofitting results in far lower overall carbon emissions than replacement.
Two current campaigns are calling on the Government to reduce or zero VAT on retrofits. The Architect’s Journal’s Retrofit First campaign calls for VAT to be cut on refurbishment, repair and maintenance from 20 per cent to 5 per cent. Meanwhile Architect Harry Paticas has set up his own petition calling for zero VAT on eco-retrofits.
The environmental argument
Homes in the UK are responsible for an estimated 15% of total carbon emissions and heating is responsible for over 60% of their energy use. To properly address the existential threat of climate breakdown, there is an urgent need to deep retrofit our homes to radically cut carbon emissions.
The AJ has set up its Retrofit First campaign “Because construction gobbles up energy and resources at a phenomenal rate: cement, aluminium, steel, plastics and more. It is responsible for up to 40 per cent of the UK’s carbon emissions. The economic model of tearing down existing structures, chucking the debris and building from scratch is hugely wasteful. If we can retain more existing structures through intelligent retrofit, we’ll reduce carbon emissions and embodied energy costs, help conserve resources, and set buildings up for a longer life.”
The financial argument
Radical low energy retrofits can cost between £30-50,000 per dwelling. Despite the significant benefits of lower bills and increased comfort, at present very little retrofit is taking place.
As Harry Paticas puts it:
“With the lack of any significant funding for a UK retrofit programme and homeowners (private and social) obliged to pay 20% VAT on all works to existing homes (with only a few exceptions) there is a strong disincentive to carry out deep retrofit works.
The removal (zero-rating) of VAT on building projects to existing homes that are based on a demonstrable deep, low-carbon eco-retrofit would act as a major stimulus to the market with the potential of achieving significant reductions in carbon emissions.”
The airline industry is the latest UK industry to demand a financial bailout from the Government following the financial impact of the coronavirus pandemic. The removal of VAT on retrofit building work would be a less climate-wrecking way to kick-start the economy and would create many new low carbon jobs, helping us take the crucial action needed to prevent climate breakdown while eradicating fuel poverty and making our homes cosier.
Please support campaigns calling for a reduced VAT on retrofit building work
STOP the VAT on Eco-Retrofit, petition set up by Harry Paticas: www.change.org/p/uk-government-zero-rate-vat-on-deep-retrofit-eco-refurbishment-building-works
Chayley Collis, Communications Manager, Green Building Store