Financial experts have claimed that the year-long VAT reduction has saved housing associations nearly £40 million already, but need to act fast to make the most before 2010

KPMG, an accountancy firm, has urged people in senior housing association jobs to act quickly before the VAT rate returns to its previous level on the first of January 2010. For the past year VAT has been at a reduced level of 15%, but from the very first day of the new year it will return to 17.5% - a small increase, but one that can have huge implications for the large amounts of money at work in housing associations.

Adam Cutler, KPMG's senior VAT manager, said that people in housing association jobs should "encourage suppliers to issue invoices for work done before 1 January 2010".

"Where suppliers bill after this date for work carried out in 2009, it will be possible for them to charge the 15 per cent VAT rate in most cases, but their accounting systems may default to charging at the new rate" said Cutler.
According to Cutler,finance departments of housing associations will need to take an active role in managing such invoices over the next few weeks.

Managing the finances and costs of housing associations is one of the least visible but most important roles in housing management. Keeping costs down is vital to providing affordable quality housing, and the VAT cut has offered associations a golden opportunity to make significant savings.

The return to the 17.5% VAT rate was announced in the Chancellor's pre-budget report this month. Although Mr Darling made no suggestion that this would raise even higher in the future, many people fear that it may rise to at least the 20% average European rate - and perhaps even higher.

Commenting on the report, Adam Cutler said: "what was particularly disappointing was there was no mention of a VAT exemption for associations working together to share costs."
"The sector will need to continue to lobby the treasury to introduce this measure, as this remains a barrier to associations managing each others stock, or otherwise pooling resources".