The Urban Task Force recommendation that VAT rates on new build and on repair and refurbishment should be harmonised will have to be tested against the realities of European law, government spokesman Lord McIntosh of Haringey told peers.
He was speaking in a debate initiated by Viscount Gage who asked if the government would consider lowering the rate of VAT rate on repairs to listed buildings. The minister replied: 'No European agreements mean that we cannot introduce a reduced VAT rate for repairs to listed buildings as such. It is government policy to offer financial assistance to the heritage through targeted conservation grants and capital taxation relief'.
Labour Baroness Maddock said it was urgent that the government should examine the discrepancy of nil VAT on new build, but VAT on the refurbishment of all types of older buildings. 'If we are serious about urban renaissance and protecting our countryside, we need to examine this issue', she added.
However, Lord McIntosh replied:'The government's response to the report will have to take account of the realities of EuropeanVAT legislation...The distinction between repairs and improvements, although it may be anomalous, is not a distinction between greenfield and brownfield sites. It is not an urban/rural issue. It is an issue that arose because the then Chancellor[Nigel Lawson], after 10 years' experience of the tax, came to the conclusion that it was not possible to make a realistic and firm distinction between repairs and improvements which was enforceable in law'.