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Reduced Rate VAT on Repairs 16 February 2004

Today the Isle of Man Treasury has announced that the 5% rate currently being applied to most domestic repairs and renovations will remain in place for a further two years. After some administrative delays the European Commission have now confirmed that the reduced rate can remain in place until the end of December 2005. The announcement, which was not unexpected, follows on from the Treasury Minister’s previous statements.

The reduced rate had been properly due to expire in December 2003. In order to minimise any disruption and confusion the EU norm of maintaining the status quo was followed by means of an extra-statutory concession. Now that a definitive decision has been reached this extra statutory concession will lapse and the 5% VAT rate will be maintained. The reduced-rate will continue to apply to the same range of supplies and subject to the same conditions as before.

Although the Island is not an EU member, its Customs and Excise Agreement with the United Kingdom has enabled it to utilise the reduced rate for the past four years. However, the European Commission, which in the longer term is looking to rationalise and simplify the overall rules for all of the reduced rates currently being used by many Member States, will continue to have the final say in this matter.

The Collector of Customs and Excise, Denis Maxwell, said:

“We had hoped that the reduced rate, which has given people on the Island the incentive and opportunity to improve their housing conditions and created some important employment in the building sector, would be continued. I am pleased that we can now confirm that it has been extended.”

The Treasury Minister, the Hon. Allan Bell, MHK, said:

“I welcome this extension for a further two years. The continuation of the rate is something that has been desired by the Treasury and we have made our views clear by lobbying hard and long, in both Brussels and London, for this outcome. As I have said before though, the continuance of the current rate beyond the two year period is not something we can rely on. I hope therefore that the industry can use this time well and consolidate the advantages being enjoyed while we are able to maintain this reduced rate in place.”

Further enquiries should be made to the Customs and Excise Advice Centre on 648130.

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