Source · Select Committees · Environmental Audit Committee
Recommendation 52
52
Acknowledged
Prioritise and incentivise building retrofitting over demolition by strengthening reuse requirements and reducing VAT.
Recommendation
Government should prioritise and incentivise retrofitting over demolition by strengthening requirements to reuse, repurpose and refurbish buildings before any demolition. It is contrary to the Government’s environmental objectives to incentivise carbon-intensive new building over the re-use of existing sites. To encourage the retrofit and repurposing of existing buildings, the VAT on retrofit projects should be reduced from 20% to reflect environmental benefits and support uptake. Government should therefore confirm that a property brought back into use would count towards its, and a local authority’s housing target. (Recommendation, Paragraph 168) 94
Government Response Summary
The government acknowledges the importance of reusing existing buildings and states that it encourages this through the VAT system with a reduced rate of 5% for certain residential renovations, but states that any further reduction in VAT rates must represent value for money and is the responsibility of the Chancellor.
Government Response
Acknowledged
HM Government
Acknowledged
95. As set out in our response to recommendation 29, On 16 December 2025 Government published a consultation on a new NPPF which included a proposed requirement for development proposals to take advantage of opportunities to re-use existing structures and materials. 96. The Government recognises the importance of reusing existing buildings and already encourages this through the VAT system. That is why residential renovations are subject to a reduced rate of VAT of 5 per cent if they meet certain conditions, including 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 or more years. 97. VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. VAT is the UK’s third largest tax, forecast to raise £180 billion in 2025/26. Tax breaks reduce the revenue available for vital public services. Any reduction in VAT rates must represent value for money for the taxpayer. Exceptions to the standard rate have always been limited and balanced against affordability considerations. Ultimately, the Chancellor is responsible for making decisions on tax policy, and these decisions are taken at fiscal events. 98. Local authorities have been given powers and incentives to tackle empty homes, including discretionary powers to charge council tax premiums alongside the use of formal enforcement levers such as Compulsory Purchase Orders to take ownership of a property, and Empty Dwelling Management Orders to take over management of a property for up to 7 years. 99. Delivery against housing targets is taken from the official Net Additional Dwellings statistic published annually. Vacant dwellings returning to use are not counted in this statistic as they would have been counted as a net additional dwelling in a previous year.