More than 55% of all homeowners have requested cash-in-hand building work to avoid paying VAT, according to new research by the Federation of Master Builders (FMB).
“This research confirms what we already suspected – too many otherwise law-abiding individuals are asking their builder to carry out cash-in-hand construction work at 0% VAT in order to cut costs,” said Brian Berry, Chief Executive, FMB. “What’s more, when the professional builder refuses, the homeowner will, all too often, find a rogue trader that is willing to operate within the black economy. That’s when homeowners inevitably become ensnared in nightmare situations with sub-standard refurbishment work that has been carried out with little or no regard for health and safety.”
Research from Experian shows that the black economy in construction is worth almost £10 billion a year but this is a conservative estimate and the FMB’s latest research suggests the real figure is much higher. It has argued that if government wanted to limit the activity of rogue traders operating in the black economy, it should reduce the rate of VAT to 5% on all housing renovation and repair work, leaving almost no competitive advantage for those disreputable builders. Not only would this help eradicate the black economy, the FMB believes it would also boost the economy by more than £15 billion over five years to 2020 and create more than 95,000 jobs.
“Charging the top rate of VAT on home refurbishment serves no purpose other than to put money in the pockets of rogue builders and perpetuate the culture of home owners requesting cash-in-hand work,” argued Mr Berry. “It makes criminals, and often victims, out of families and individuals who are struggling with the cost of living and acts as a barrier to growth in the economy.”