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Alok Sharma is MP for Reading West and a Vice Chairman of the Conservative Party.

Policy ideas involving tax breaks to help ease the cost of living are in political vogue. One model of tax breaks, introduced in 2008 by the centre-right coalition in Sweden, should be considered ahead of the Autumn Statement.  The policy been shown to deliver in three key areas. Generating economic activity and increasing employment. Helping homeowners with the cost of living.  And cutting down on tax evasion.

Since 2008, Swedish taxpayers have been able to claim for half the cost of labour, up to a rather generous tax credit of around £5,000, for any building repairs or maintenance work undertaken at their home.  The cost of materials used as part of the repairs or maintenance is not tax deductible.

In order to incentivise take up of the scheme rather than individuals having to wait until their year-end tax return to claim the credit, businesses carrying out the works charge the householder for half the labour costs upfront and claim the remaining half from the tax authorities which pay promptly.  And the tax office keeps a note of taxpayers who have taken advantage of this scheme to ensure that the total tax credit paid out in respect of any one individual does not exceed the set limit.

The Swedes introduced this policy as a structural measure to stimulate employment and growth whilst nudging economic activity from the shadow to the taxpaying economy. After all, why pay cash-in-hand when there is a tax incentive to use a legitimate service provider registered for tax?

Apart from seeking to increase the tax collected by the Swedish exchequer the additional benefits of this policy have been to drive up demand for both services and goods in the wider building sector, as well as helping individuals with the cost of living.

The policy has proved to be popular with homeowners and businesses in Sweden and in 2011 over 81,000 companies benefitted from it, with around a million tax payers taking advantage of the initiative.  The gross cost of the policy to the Swedish government in 2011 was around £1.3 billion, but this is before taking into account the extra corporate, personal and value added taxes flowing into the Swedish treasury from the increased economic activity.

A British version of this policy, set at an appropriate level of tax credit, could also be used to promote other initiatives.  For example, any business wanting to take advantage of this policy could be required to take on an apprentice.

A policy which helps to boost economic activity, create extra work for smaller businesses, whilst at the same time helping people with the cost of fixing their boiler or heating system, repairing that damaged fence or finally getting that half-finished hallway painted, deserves serious consideration.

10 comments for: Alok Sharma MP: A tax break which would help both businesses and individuals.

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