EU member states may soon be able to cut VAT rates for local service firms, under new proposals outlined by the European Commission. 

If the new rules are implemented as planned, national Governments could apply to reduce VAT rates across a range of areas. The housing sector, restaurants and personal and domestic care firms could benefit from the potentially lower rate.

Cleaning and gardening services are also amongst the agreed list of local services that may gain from the proposed changes.

Currently the minimum standard rate of VAT in the EU is 15%, although there are many discrepancies throughout the 27 member states.

The Federation of Small Businesses (FSB) has welcomed the move, claiming that lower VAT rates could provide a significant boost to small enterprises throughout the UK.

Tina Sommer, FSB EU and international affairs chairman, said: ‘The British Government must take advantage of these proposals to ensure our high street can survive the economic downturn. 

‘National Governments should be given more control over how they use VAT to stimulate demand, so long as there are not drastic consequences for the Single Market’.