The National Federation of Builders (NFB) has warned that the likely increase in VAT to 20% will play into the hands of rogue construction firms.
The Federation, which represents 1,300 small and medium sized contractors, says increasing VAT will give so-called ‘cash in hand cowboys’ an even greater advantage over reputable, taxpaying construction businesses.
Over the last few years, the NFB has lobbied for reducing the rate of VAT on domestic construction to 5% to level the playing the field between the cowboys and bona fide builders.
The NFB said recent studies in France and the Netherlands have showed that cutting VAT reduced rogue trader activity, and were revenue neutral for the respective Treasuries, as the measures encouraged a greater number of companies operating in the black economy to start paying tax.
Julia Evans, chief executive of the National Federation of Builders, said: “We have campaigned for many years to lower the VAT rate on domestic construction work to five per cent in order to close the cost gap that is exploited by cash-in-hand cowboy builders at the expense of reputable taxpaying businesses.
“Increasing VAT will simply exacerbate the problem and inevitably drive more homeowners into the arms of rogue traders.”
Over 100,000 complaints are made about rogue tradesmen each year, according to figures from the Trading Standards.