European VAT agreements allow member states the option to apply a reduced VAT rate, of not less than 5 per cent, to certain specified supplies of goods and services. These include the provision, construction, renovation and alteration of housing, as part of a social policy.
Where 5 per cent VAT rates are available for a given supply, the UK Government have applied these only where they provide the best-targeted and most cost-effective support for their objectives.
Consistent with this, as part of the Government's policy to increase the availability of housing stock by bringing substandard housing back into use, a 5 per cent reduced rate of VAT has been applied to the renovation of residential properties that have not been lived in for two years or more.
All taxes are kept under review and any changes in this area will be considered as part of the normal Budget process.