Under agreements governing the application of VAT reliefs throughout the EU, successive Governments have agreed with European partners not to extend any existing VAT zero rates or introduce any new ones. The scope of the exemptions from VAT is similarly limited by European VAT agreements.
These agreements do make reduced VAT rates of not less than five per cent. available in strictly limited areas. However, there is no reduced rate available that could be applied to all managing agreements between housing associations, regardless of the services carried out under these agreements.
Where VAT reduced rates are available under European agreements, we have applied them sparingly and only where they offer the most cost-effective and best targeted support for our social objectives when compared with other policy instruments.
In relation to housing, reduced VAT rates have, to date, been targeted in areas where a VAT reduction would have the greatest effect on the regeneration and renewal of the UK housing stock. For example, the Government have applied a reduced VAT rate for certain residential conversions, and on the renovation of housing that has been empty for more than three years. These VAT reductions are aimed at supporting better use of the existing housing stock and helping to bring vacant homes back into use.