]In the past few years, there has been a shift, not a seismic one but a shift nonetheless, towards encouraging repair over replacement, which makes sense financially and also environmentally, but moving people away from the addiction of just throwing stuff out when it breaks and buying a new one is not an easy task.
That said, some research, what little has been done and we’ve got wind of, seems to suggest that people would often rather repair than replace.
But, they very often don’t. You need to ask why.
Repair Cost vs Replacement
For repairers, yes, we know it’s not always so simple, but we can’t bang on and write a novel (it’s long enough as it is!) so, bear with us and the summarisation and distillation of things.
This is the thing that we see all the time where people look at a busted machine and from what we’ve see and heard in the field the train of thought with owners runs that; we can try to repair but it’ll cost £XX in a callout then if it’s the YYY that’s faulty the cost is liable to be almost that of a replacement or perhaps even more.
Usually, the owner will have Googled what they think might be faulty, which is invariably the worst case possible cost-wise, added what they think the labour cost will be and get to a result that suggests to them that a replacement is the best option.
We don’t know how many machines a year are scrapped due to this, but we’d guess it’s tens of thousands, if not many tens of thousands.
How do you try to stop this, to encourage people not to do that and look more at a repair rather than replacement?
Make Repairs Cost Less
Obvious really isn’t it?
Make repairs cheaper by reducing VAT, stopping all those sealed units and getting the cost of parts down.
That’s what we hear from repairers who often think that getting things like that done is possible and, often, easy to do.
In those two sentences, there is so much to unpack, enough to write at least three or four articles, but to cut it short, none are easy to do, and it’s likely some are nigh impossible to achieve.
Here we’re only looking at one, VAT.
Remove Or Reduce VAT On Repairs
This has been mooted to make repairs cheaper, remove VAT on spares, labour or just repairs in general. Or, reduce the VAT rate.
The thinking being that this would reduce repair costs by 20% (obvs), a fifth cheaper overnight and that would make more people consider a repair rather than a replacement.
But, would it really?
Or would repairs and parts sellers just bump up their prices to take advantage of this?
If you were a minister in government, what would you think?
And this is before we even get into how you’d apply this, the complexities of it, how to administer and account for it and so on. All of which would lead to costs so that 20% would never have been 20% in any event, we reckon.
It is completely understandable that people, repairers especially, would think that this is a great idea and a simple solution to what is a very real problem, we suspect it isn’t or it’s not the simple solution to what is a complicated problem.
We Already Have VAT-Free Labour
Many will cry, “That’s not true!”. But, yes, we do.
Just not for larger repair businesses, only for repairers that have a turnover below (at the time of writing) £90K per year.
Until you go over that amount as a business, you can trade without being registered for VAT so you don’t need to charge VAT on your labour.
Of course, you do pay VAT on parts purchases (and you can’t reclaim that as a VAT registered business can) but that doesn’t make a massive difference to customers, a slight reduction in cost but not much. The big saving is in labour where there’s no VAT.
That means that customers getting a repair will get it cheaper from a small, non-VAT registered business than they would from a larger VAT registered business. So, the smaller business has an advantage. We’d think at least a 10-15% cost saving over using a large, VAT-registered repairer.
We’d accept that this is not the be-all and end-all for everyone, but it’s a win for smaller repairers and a win for customers who are clued up enough to use them.
Below The Threshold
This is why a lot of small repairers, especially those who tend to be a bit older and more experienced, do not want to grow their business. They want to stay under the VAT threshold so they don’t have the costs, etc, of accounting for that, they know that not being VAT registered makes them cheaper, and they don’t want to be snowed under with work as they’d rather spend time and do the job right.
There are so many reasons that many repairers do this and it makes total sense.
Customers get better service, cheaper. Already VAT free, bar any parts needed but not VAT on any margin on the parts, not that there’s huge margins in parts as we know all too well.
VAT Probably Isn’t The Answer
We get it, this is an easy answer to the problem of expensive repair costs, but it’d only potentially help larger repairers and, at the same time, might well make the smaller repairers less competitive, weirdly.
It’d advantage for larger repairers and corporate organisations, more we suspect.
As for customers, it’s not a guarantee they’d gain anything here; they’d only win if all repair businesses knocked off the costs. We don’t think they would.
So, the status quo is probably best. At least in terms of VAT on repairs in general.
