June 2010
August 24, 2010 Leave a Comment
“What steps should the new government take to improve the UK’s housing market?
With a coalition government now in power, much of the old political dogma has had to be binned and
the search is now on for consensus and research driven policies.
In keeping with this spirit of blue sky thinking, one area well worth exploring is the more creative use of tax policies.
To date, most of the green policy initiatives for the construction sector have been aimed at new-build
developments.
However, given the vast inefficiencies of the current housing stock in the UK, doesn’t it make sense to
look at measures such as the removal of VAT on housing refurbishment and renovation projects. This could have significant benefits when it comes to retrofitting green technologies into older homes. Governments in the past have tinkered around with grants for loft insulation and draughtproofing, but a simple measure like the abolition of VAT would incentivise homeowners without narrowing their design options. Such a move should also prove excellent news for the tiling industry as well … just imagine the number of wet underfloor heating systems powered by solar panels or ground source heat pumps and finished with natural stone or ceramic tiled floors that could result.
The government would also do well to reconsider the arbitrary Stamp Duty thresholds. Why should tax bills soar just because a buyer spends an extra £1 over one of the £250,000, £500,000 and (from next April) £1m thresholds? The current system distorts the market, discourages liquidity and damages labour market flexibility. There must be a better way of raising tax receipts from home purchases.
Finally, while it may be too late to change the decision over the new higher Capital Gains Tax rates, there clearly needs to more effort made to recognise the difference between short-term and longer-term capital gains on investments.
Alternatives, in the form of an indexation allowance or, better still, a tapered relief structure, exist. It cannot be beyond the wit of Whitehall to come up with a system that stops business owners for avoiding their tax liabilities through CGT, without disincetivising the entrepreneurial spirit upon which the much needed economic recovery will be based. Here’s hoping!”
Joe Simpson
