The increase in VAT to 20% is having a disastrous effect on the building trade and will no doubt prompt many more tradesmen to take on cash jobs, ironically driving down the government’s tax receipts.
Much building work does not fit into the 'luxury' bracket and I therefore call for the government to review the threshold or lower the rate, and provide a more even playing field. If not, the temptation for many previously law-abiding tradesmen to take on cash jobs will only increase.
How the government reacts to this issue will be critical to the future of our building industry.
The government should consider carefully how to deal with the issue of the VAT threshold for tradesmen and review how to fix this - as it is simply not working. The threshold already makes it very difficult for companies billing over the threshold to compete with smaller firms.
The government should consider carefully how to deal with the issue of the VAT threshold for tradesmen and review how to fix this - as it is simply not working
And as the tax rises kick in, medium-sized businesses will increasingly find themselves at a disadvantage. The misconception amongst the public that accepting a cash job will save them VAT on the whole bill - materials and labour - only adds to the problem.
In fact, all tradesmen, whether VAT-registered or not, will pass on the VAT they pay on materials to the customer. Yet the perception persists, making cash jobs seem more attractive financially than they in fact are.
