VAT rise to hit associations hard
The housing association sector will see its tax bill rise by millions of pounds following an increase in VAT announced in Tuesday’s emergency Budget.
Chancellor George Osborne announced that VAT will rise from 17.5 per cent to 20 per cent on 4 January 2011. The measure will raise £53.9 billion between 2010/11 and 2014/15.
The 2.5 per cent rise in VAT will put up the cost of materials for repairs and house building. Unlike councils, housing associations cannot reclaim these costs.
Steve Coffey, chief executive of Liverpool Mutual Homes, said: ‘For us it is worth about £0.5 million a year. It’s [an increase in] repairs, maintenance, office costs. That just means we have got to make further efficiencies.’
He added that it would hike up the cost of living for staff and tenants. He added: ‘We were expecting it bad and we weren’t disappointed.’
Sir Bob Kerslake, chief executive of the Homes and Communities Agency, said: ‘VAT is important, it is an additional cost which won’t be recoverable by way of rent, it will clearly have an effect on operating costs. The challenge will be how much associations can reduce the impact by achieving greater efficiencies.’
David Levenson, finance director at Network Housing Group, said the increase would hit his housing association’s repairs budget.
David Orr, chief executive of the National Housing Federation, said the VAT increase would discourage housing associations from building more homes. He added that the increase in costs for everyday goods and services would ‘hit the poorest families the hardest’.
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Readers' comments (3)
Stephen West | 25/06/2010 8:35 pm
Oh dear the multi million pound profit making RSL's/ Housing Associations who have benefited by snapping up tens of thousands of former council homes on the cheap are now going to be hit by the increase in VAT. What about their leaseholders who having no choice over major works programmes that their landlords come up with who also have to fork out 20% VAT on top of their management mouth watering fees of 15% why does no one lament over their hardship or dont social sector leaseholders count for anything anymore?
Stephen West
Orbit Bexley Housing Association Independent Leaseholders Group
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| 26/06/2010 12:44 pm
I thought you would comment on this Stephen when I saw the article and glad you did. Well said. It is absolutely not in the interests of leaseholders to vote for LSVT to RSL which is why I guess many LA's who ballot on this exclude their leaseholders from the decision. Which appears to be contrary to Article 14 of the Human Rights Act which prohibits discrimination on the grounds of "association with a...property". Leaseholders should always raise this Article if they find themselves locked out of decision making by their LA.
We all know HA's charge VAT on their leaseholders bills and LA's do not as they are exempt. But what about ALMO's? There is no line statement for VAT in the service charge breakdowns issued but does anyone know if ALMO's are levying VAT on management charges like HA's do?
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Stephen West | 28/06/2010 7:38 pm
Thanks ILAG for your support, RSL/Housing Association leaseholders have no say over the services they receive or pay for, and planned maintenance works are routinely put through with no consideration given to leaseholders concerns. If we had stayed with Bexley Council at least we would be spared 20%VAT on top of ludicrously expensive management fees.
I would suggest that ALMOs are not like RSL/ Housing Associations as they manage on behalf of the local authority which retains ownership of the housing stock, as such VAT should not apply.
As the law still stands only council tenants are balloted over Large Scale Voluntary Stock Transfers as leaseholders have more legal rights than tenants and cannot easily be evicted or have their leases revoked/ forfeited. But leaseholders have everything to lose and nothing to gain by LSVST, and should still be allowed to vote as they also have human rights. For us in Bexley the Stock Transfer came in to being back in 1998 before the Human Rights Act of 2000, but we are challenging our transfer now by hopefully requesting for a judicial review as only the question of the actual housing stock came up at the time of the transfer and nothing regarding vast swathes of former publicly maintained estates lands. car parks, footpaths, roads, play grounds etc that the public have unfettered usage of and have done under the common law and common law land usage of 20 years or more unrestricted access and usage by the public at large.
We base our challenge on the Appellant Court 2000 case of Gulliksen V Pembrokeshire County Council case law, which still stands.
Stephen West
Chairman
OBHA Independent Leaseholders Group
obha-leaseholder@hotmail.co.uk
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