From April 1st 2013 those who choose to take on the renovation of an empty property, or who undertake major home improvements that require them to move out for a few months, will be hit by yet another tax hike. The 12 month exemption from council tax on empty properties undergoing major structural repair, will be replaced by a 50% reduction on the full council tax for 12 months, and thereafter the full tax will be payable.

Properties that are still habitable but empty and awaiting remodelling, extension or updating will lose the six month exemption from council tax and will instead get just one month, followed by five months at 50% and then the full amount.

The most significant change, however, is the charge on properties that have remained empty for two years or more. Rather than the 50% rate currently being paid, from April 1st 2013 a premium of 50% will be charged, raising the council tax to 150%.

The rise in taxes is intended to encourage property owners to bring empty homes back into use. The unintended but likely outcome is that some outdated houses will be demolished to make way for new dwellings, rather then be left standing empty with the meter running. Building plots are not subject to council tax – at least not yet!

The current VAT anomaly, whereby new dwellings are Zero rated for VAT but building work on even substantially rebuilt and renovated properties is standard rated at 20% already tips the balance in favour of demolition for many older properties and this latest change adds yet more momentum behind the wrecking ball.

In the same round of changes, full council tax will be applied on second homes (furnished properties where no-one lives or the owner has a main home elsewhere). This seems entirely reasonable – I’ve always wondered why those wealthy enough to have a second home get a tax break on their council tax.

This new tax hike is unlikely to put anyone off undertaking a renovation project and may well spur some into action sooner rather than later, but once again – like the Community Infrastructure Levy, the Affordable Housing Levy, Commuted Section 106 Contributions, and other new taxes on development, homeowners looking to create a nice place to live will have to scale back their plans, as another slug of their budget gets redirected to the tax man, out of the private sector economy and into the hands of the inefficient, unproductive public sector. No way to stimulate an economic recovery.

  • kevin moore

    would a new eco garden office with SPV qualify for reduced rate of VAT?

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