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Government should change VAT rules and developer’s tax to accelerate the installation of replacement cladding and make it cheaper

Work on replacing dangerous cladding on high rise buildings throughout the country could be accelerated hugely and made cheaper if the Government removed VAT charges for cladding and dropped a proposed tax on developers, says Heather Powell.

The Government, homeowners, developers want the cladding that puts high rise homes at risk to be replaced as soon as possible, but the Government is missing two easy solutions that could both accelerate and make the works required more affordable.

Post-Brexit, the UK Government has control of what products and services VAT is applied to. The costs of sorting out the cladding are all subject to VAT at 20% – a charge that the Government can easily remove. This would be a significant reduction in the cost that leaseholders must pay for the works.

It is time for the Government to use some of the powers that Brexit has given to resolve problems in the UK.

Major developers who have shown that they are willing to step up to the mark and undertake the remediation work required on flats they built have been told that they will be required to pay a Developers Tax from 2023.

Is it in the best interest of the shareholders of these companies (to whom the Directors report) to continue with the remediation works and pay the Developers Tax? A hard headed financier could argue that the remediation works, which the companies are not legally required to pay for, should be cancelled, saving the companies millions.

If this policy was adopted the misery of the flat owners would be extended  and compounded by increased financial liabilities. The best solution is for the Government to make it clear that developers who have completed all remediation works by 2023 will be exempt from this new tax. Leaseholders will be delighted, and developers who have taken their social responsibilities seriously will be rewarded.

The cladding crisis has already gone on far too long. The Government can accelerate the solution and really encourage developers to sort out the problem by taking these two simple steps.

Would you like to know more?

If you would like to discuss any of the above guidance, please get in touch using the contact details to the right or through your usual Blick Rothenberg contact.

For any press queries, please contact David Barzilay whose details are to the right.