Reflections on the AECB Conference
What a great day, with wonderful people, inspiring projects and challenging discussions
There was a lot of talk about the cost of retrofit
As part of the final panel, I pointed out that the building industry as a whole is suffering from massive inflation in the cost of everything. People generally rush to label environmental measures
But we need to fundamentally change the way we frame retrofit altogether. Retrofitting is unavoidable. Even if we conveniently place the climate crisis to one side, we are faced with a housing stock that was majority built circa 100 years ago or built as a temporary measure.
Nearly every project we approach for retrofit has a roof reaching the end of its natural life, some sort of damp issue, often structural issues, electrics and/or heating and plumbing upgrade required and they almost never have an active ventilation strategy in place. This is without even mentioning insulation or airtightness, which is most often practically non-existent. This means that the majority of our homes end up being cold, impossible and/or expensive to heat.
We live in a country full of inadequate housing. This is a fact we need to wake up to. If the Victorians were in our situation, with the knowledge we now hold about how to create healthy, warm homes, they would flatten everything and start again! For obvious carbon, cost and heritage reasons, we are not going to suggest this!
One of the points made by the wonderful Rachael Owens last week, is that we as a society have become used to accepting a lower standard of housing. If someone, say for example, a housing association or developer, acquires properties which are in a state of disrepair, there is a bear minimum expectation in terms of providing a fit for purpose, sanitary kitchen, functioning bathroom and a basic level of presentation. Nobody asks about the payback period for these elements, because they are considered the necessary for an adequate home.
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What about a healthy home? Should it not be that a healthy and safe home
Finally, I can’t resist mentioning VAT. Anyone who says that retrofit is zero rated is wrong. Anyone who says retrofit is not zero rated is wrong. Here’s why…
I am not a VAT expert. However, I have read VAT Notice 708/6 many times. My understanding (and I would gladly be corrected on this) is that any work you do which is associated with the primary function of insulating or improving energy efficiency
We have found builders who are happy to charge VAT as they feel appropriate, based on this guidance. This may mean splitting a Contract into ‘thermal works’ and ‘remodelling’, or it may mean clearly identifying the separate measures within the invoicing and contract. However, Bill Butcher made the very valid point that it is the builder who ends up taking on the risk of deciding what is zero rated VAT and what is standard rate VAT. This seems supremely unfair.
I have spoken to more than one accountant who can’t tell me the right approach with this. So why do we feel it is appropriate to place this burden on builders, who majority will not have formal training in this area?
I understand that this is a potentially complicated subject, so I would like to propose a solution to simplify things. Make all AECB or Passivhaus standard Retrofits Zero Rated VAT.
So, Kier Starmer, what do you think?
Senior Architect @ ECD Architects
5 个月Brilliant Hannah, thank you. Re VAT I would make all retrofit AND repair zero rated, and add the VAT to newbuild. But your suggestion is more realistic, and I agree with it. We also need to accept that paying for repair and retrofit will mean spending less on other things. In CO2e reduction terms reducing flying and animal-dominated agriculture are financially more effective (you could actually pay people to go more vegan or reduce their flights, compared with say "carbon capture" schemes) but we need to do it all, and win that argument in terms of accepting a bigger tax burden.
Director | Architect | MSA Council Member
5 个月Thanks for this Hannah, I’m sure many of our builders would be glad to know they can shave some of their VAT costs to the client - however, they still pay the 20% and then accept the risk that they will try and claim the VAT back based on their own self-assessment. So clarity from the government would be really useful. Or even just some worked examples.
Managing Director at Five Rise Contractors and Bentley Drains Limited
5 个月All great points Hannah. As one of those contractors who have to “decide” which side of VAT argument works falls into, we probably get it wrong! We don’t get much help from merchants either, some try and sell on the basis of ‘ VAT reductions/except’, others stay well away and leave it to us. If anybody can explain it to us we would be extremely grateful! We are trying our best to keep costs down and VAT except status would allow many more people to push their retrofits a bit further or just allow some to start.
Low / Zero Carbon Building Designer | Architect | Chartered Engineer | Lecturer | Client Advisor on Sustainability, Passivhaus, Retrofit & Net Zero
5 个月Great reflections Hannah Dixon, and I agree with your thinking on all your points. Although, as I’ve said on this platform many times before, I think VAT needs to be completely removed on retrofit and refurbishment works entirely. In fact I would shift the taxation to be more a circular economy approach, ie anything connected to existing buildings should be VAT free, and this revenue can be offset by new buildings being taxed instead (either at a reduced level or the full 20%).