CURRENT tax rules are undermining sustainable development by rewarding developers who demolish buildings and penalising those who refurbish. University of Brighton lecturer and architect of the Waste House DUNCAN BAKER-BROWN calls for change.

There’s something wrong with Britain’s sales tax regime. It is forcing homeowners into bad environmental decisions which endanger the country’s carbon reduction targets and undermine efforts to boost housing supply when it is most crucial.

Historically, there have always been situations where VAT is charged at lower or zero rate, such as food, medicines, books and some forms of transport.

There is one other area of business where the two-tier system applies – construction.

New houses and developments are VAT zero-rated, whether carried out by one-off Grand Designs-inspired families or major national house builders.

But if renovating or extending an existing house or estate, VAT is a full 20%.

When you consider most residential properties are built by massive national house builders, and most refurbishments are undertaken by individuals, you can see where the emphasis of this VAT policy really lies.

There are other unforeseen, negative consequences.

Anyone wanting to convert their lofts or build extensions has to pay 20% of their hard-saved cash straight to the Treasury.

In some cases it stalls the project. In other cases people simply pay small constructors cash-in-hand and the shadow market flourishes.

For larger refurbishments there is another ludicrous consequence.

A “green retrofit” will probably reduce the carbon footprint of a gas-guzzling home by 60-80%.

But most people would baulk at handing over £350,000 on a £1.75 million project, when they can save more than £300,000 by demolishing the existing property and build a completely new property with zero-rated VAT.

Even if commercial house builders start building at post-war levels of 300,000 new homes per annum, more than 85% would still be old 20th-century homes by 2050.

These homes need eco-refurbishments to ensure we have any hope of meeting commitments to reduce carbon dioxide reduction emissions.

The targets can only be met if government works with homeowners and small building contractors who renovate their properties.

This simply will not happen while work to these existing homes is undermined by excessive taxation.

We need a level playing field for newbuild and renovation projects. VAT rules should encourage green retrofit projects, not undermine them.

Could there not be a sliding scale of VAT for renovation projects that supports green retrofits?

Why not award a scheme that reduces a home’s CO2 emissions by the government’s own target of 80% with a zero-rated VAT policy?

We must reward people for helping achieve ambitious carbon reduction targets, not persecute them.