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Press Release

BUDGET 2006: WILL THE CHANCELLOR SIGNAL AN END TO THE BROWNFIELD ANOMALY?

21 March 2006

CPRE [1] will be looking to the Chancellor in his Budget speech this Wednesday (22 March) to signal his commitment to urban renewal by taking action to end the longstanding anomaly in the rules surrounding VAT. Currently, VAT is charged at the full rate of 17.5% on most building repairs and conversions, whereas new build is zero-rated.

There is a narrow window of opportunity to address this issue. The Treasury has until 31 March to make representations to the European Commission to reduce the rate of VAT on building repairs and conversions [2]. CPRE will be looking for signs in the Budget that the Chancellor is prepared to take action to end this anomaly.

As well as its importance to the safeguarding of the UK’s historic heritage, there are strong environmental, economic and social grounds for reducing the rate of VAT on building repairs and conversions. In particular, it would help bring England’s 700,000 empty homes back into use. In general, subjecting repairs and conversions to the full rate of VAT acts as a deterrent to urban regeneration, and to the maintenance of buildings and care for the historic environment, all objectives to which the Government is committed.

There are other harmful consequences. The additional cost VAT adds to repairs and refurbishment distorts the market so that it favours new building over re-use and refurbishment. It also encourages greenfield development, making it harder to deliver the renewal of urban areas to the benefit of us all. Making better use of existing buildings is essential to regeneration and can play an important part in reducing waste and conserving scarce resources, such as land, energy and building materials.

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NOTES FOR EDITORS

1. CPRE, the Campaign to Protect Rural England, is a charity which promotes the beauty, tranquillity and diversity of rural England. We advocate positive solutions for the long-term future of the countryside. Founded in 1926, we have 60,000 supporters and a branch in every county. President: Sir Max Hastings. Patron: Her Majesty The Queen.

2. The Treasury has until 31 March to make representations to the European Commission to extend Annex K of the Sixth VAT Directive to the whole of the UK: at present it is only in force in the Isle of Man.



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