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Scrap VAT for landlords trying to improve EPC ratings - call

The British Property Federation is calling on the government to use next week’s Budget to zero-rate VAT on work which allows homes to improve their energy efficiency.

The BPF argues that the government has a critical role to play in supporting property owners and needs to act to relieve the pressures facing those in the residential sector, to ensure that the UK meets its net zero carbon target. 

It wants zero rated VAT on building repair and maintenance of residential buildings to incentivise essential upgrades across the residential sector. And it claims the current approach of targeted VAT relief on the installation of energy saving materials is ineffective, as it fails to recognise that energy efficiency improvements are rarely carried out in isolation.


It says the UK faces a substantial challenge in retrofitting its residential housing stock, with an estimated 58 per cent of properties having an EPC of D or lower in England, and with fewer than a fifth of owners believed to be planning to improve their property’s energy efficiency. 

The BPF says commercial property faces a similar challenge with an estimated 10 per cent of buildings in London rated EPC F or G. 

To encourage investment in large scale commercial retrofit projects, the BPF is advocating for reform of the capital allowance system to better support and encourage long-term investment into carbon reduction and energy efficiency measures. The BPF proposes an alternative form of relief for capital expenditure that would provide full tax relief in one year and use a repayable tax credit system.

And it adds that the government should also take immediate measures to ensure that business rates are not a barrier to improvement and introduce improvement relief. This would ensure that property owners are not penalised by rate rises immediately following environmental performance improvement works. 

BPF chief executive Melanie Leech says: “Some 80 per cent of commercial and residential buildings that will exist in 2050, the deadline for reaching net zero, have already been built. 

“The country’s homeowners and commercial property owners face a real challenge in reaching net zero targets and complying with incoming legislative changes. Failure to remove financial barriers to energy efficiency upgrades, is a failure to recognise the huge task the country faces in reaching net zero.

“The government needs to recognise the importance of incentivising energy upgrades across both the commercial and residential property sectors in next week’s Budget. The Chancellor has a clear opportunity to alleviate costs for households and encourage investment in measures that improve a property’s energy efficiency.”

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    Landlords are not going to get any help, we all know this. It’s pie in the sky. My D properties will be sold to FTB’s who don’t have to bother.


    You're 100% correct Simon. No way will landlords get any help.

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    This is a great idea from the BPF, who are an excellent, forward-thinking industry group that I have a lot of time for. I have used the Government's very generous Capital Allowances Super-Deduction tax break to improve the energy efficiency of a couple of industrial rentals that I own. As with any tax planning initiative the key is to have the complete action plan in place before you spend the money, rather then trying to complete your accountant's paperwork after the event.
    It's great news that the number of poor performing commercial buildings in London has dropped to just 10%. When the Minimum Energy Efficiency Standards (MEES) Regs were issued in 2015 I believe the number of dreadful EPC Grade F & G commercial buildings in London was a staggering 25%. Clear, hard evidence that EPCs and MEES are working very nicely in the commercial rental sector. This results in lower energy bills for British companies (both large and small), lower carbon emissions and less reliance on imported gas and oil.
    I know this will be very pleasing news to many readers of LandlordToday.

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    While zero rate VAT sounds good in theory the likelihood is suppliers and installers would just use it as an excuse to increase their prices, so there would be no saving for the consumer. Some of it is already zero rate anyway.

    Making energy improvement work fully tax deductable would be of far greater benefit, especially as landlords pay far more tax than anyone else due to Section 24.
    I would further suggest that any energy improvements we have paid for in the last 3 years should be allowed to be retrospectively allowed full tax relief. It would very cheaply provide a huge amount of data relating to how much impact targeted tax reliefs have. A true before and after picture.

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    All insulation products should be VAT exempt for all customers.

    Fitting them should also be VAT free for all contractors.

    There's enough competition to make sure suppliers don't rip us off with hiking up prices.

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    No chance of that happening

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    Seems a good idea in theory. Although its not so easy to get a trades person to do anything just now so they can probably name their price. Certainly think loft insulation and other insulation materials could be a lot cheaper.

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    • B L
    • 10 March 2023 15:06 PM

    Why don't we fix the economy, inflation, recession, before we talk about the moon and stars.
    Agree with one of the comments above, "While zero rate VAT sounds good in theory the likelihood is suppliers and installers would just use it as an excuse to increase their prices, so there would be no saving for the consumer. "
    We have too much theory, but nothing practical. Every time when there is a new regulation, contractors just take the opportunity to increase the price. It is a waste of landlords' money. Please fix the tax relief and reduce the stamp duty. This is our priority.
    Vat is a contribution to the government fund, scrap vat doesn't help the consumer, nor the government. All energy companies should pay 25% of any new boilers installed and boiler price should be capped. To ensure prices are not inflated. Banks and energy companies are making all the money and google and apple. They need to pay more tax. Learn from the US, catch the big tigers.


    Agree BL. Whilst this industry is being targeted and making it very hard to turn a reasonable profit, then Landlords will look elsewhere to invest their money.
    This will be bad for tenants and the housing market in general.
    In my opinion house prices are going to stagnate for a very long time. Hence I am leaning towards leaving this market. Why would I remain.
    I would add to this that I have 3 long term tenants whom I will remain in partnership with currently.

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    The big American tech companies dodge tax and use political pressure to stop paying it. I estimate that vat adds about 5 % to my turnover which obviously is paid by the customer. The PRS contributes substantially to the tax take. However the home office suddenly discovered it needs another £2 billion to house illegal immigrants. And now another massive amount to build and run what is a massive transit and process camp in France for them.

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    Martin, yes it all wonderful Commercial Buildings have dropped to 10% EPC’s MEES, forgot to mention thousands of them have been converted to residential, muscling in on Private landlords and contributing to the fall you claim, simply they are not Commercial anymore.
    Another thing a major New Development in Hanger Lane, Area West London have poorly rated EPC’s, “D” (59) imagine that. Check it out for yourself for Sale one bed New Flat leasehold, what can you do with that now ?, and still 10 points short of a “C”.

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    Sounds like another case of fiddled statistics. I was involved in refurbishment of what was an old aircraft hanger. Roof insulation would be staggeringly expensive and would require massive strengthening of the roof, to cope with the weight. Probably even the foundations require strengthening. Installed portakabin type buildings inside, for personnel.

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    Bad news folks, Silicon valley bank has gone bust. 97 ,% of deposits are unsecured. Probably triggered by the collapse of a bitcoin exchange.

    • B L
    • 13 March 2023 14:54 PM

    It is because of the aggressive interest rate increase in a short period of time by the FED.
    When SVB needs new income flow, sold long term bonds HTM and short term bonds AFS running a loss putting it into solvency. BOE has to stop the aggressive interest hikes. Otherwise, UK banks will follow. This is a warning sign to the government.

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    Edwin, can well imagine that the size of them Aircraft hangers that I seen at Heatrow & Weybridge where they built the Typhoon.

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    Micheal, they weren't that big, it would have had spitfires, hurricanes in it. Same point however as for most commercial buildings they are basically a large shed and the cost of insulation is totally uneconomic due to the large surface area. As you said probably re designated.


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