Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of any distortion to the housing market caused by VAT on the renovation and restoration of existing homes as opposed to VAT exemption for the building of new homes; and what plans they have, if any, to address such distortion.

The construction of certain new-build properties, including residential buildings, is subject to a VAT zero rate to encourage the construction of new homes. A reduced rate of VAT at five per cent is also maintained, subject to certain conditions, for residential renovations. This includes conversions of buildings from one residential use to another, conversions from commercial to residential use, and the renovation of properties that have been empty for two years or more.

Extending this VAT relief would impose additional pressure on the public finances to which VAT makes a significant contribution. As such, the Government has no plans to introduce a VAT relief on the renovation and restoration of existing homes; however, the Government keeps all taxes under review.

A temporary zero rate (up to April 2027) also applies to installations of qualifying energy saving materials, such as insulation, solar panels and heat pumps into residential accommodation. This relief is targeted at materials that specifically improve the energy efficiency or reduce carbon emission from a residential property.