Press Release

VAT cuts would show support for the high street

Monday, July 7 2008

European Commission proposals to allow VAT cuts on labour intensive and locally-provided services have been welcomed by the UK’s Federation of Small Businesses (FSB), which called on the UK to support and implement the tax cuts.

The list of areas under which national governments could apply for reduced rates now includes:

- The housing sector – supply and construction of all housing (including renovation, maintenance and cleaning);

- Minor repair of tangible movable goods, including bikes but excluding other means of transport. Examples include shoes, clothes, computers, watches;

- Cleaning and maintenance services of all these goods and, in this case, other means of transports are included;

- Domestic care services (e.g. home help and care of the young, elderly, sick or disabled);
All personal care services (including hairdressing, beauty services);

- Gardening services;
Restaurants.

The FSB has called for the British government to seek a less rigid application of VAT rules to enable more flexibility in reducing sales tax. It has also insisted that the UK’s historic exemptions – in place since EU accession – remain. 

Tina Sommer, EU and international affairs chairman, said, "As the credit crunch bites, some of the first luxuries to go will be home improvements, eating out and a trip to the hairdressers, so local businesses in these areas will welcome this move.

"The British government must take advantage of these proposals to ensure our high street can survive the economic downturn. 

"National governments should be given more control over how they use VAT to stimulate demand, so long as there are not drastic consequences for the Single Market.

"The UK has been allowed to exclude certain items, such as newspapers and children’s clothing, from VAT altogether, and this historic exemption must continue."

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