Major UK business groups have thrown their weight behind new Labour plans to cut and then entirely scrap business rates in what is being billed as “the biggest overhaul of business taxation in a generation”.
Shadow chancellor Rachel Reeves will tell the Labour party conference in Brighton tomorrow that a Labour government would replace business rates with an entirely new system that will “incentivise investment” and launch a review into tax breaks.
The new policy will see the small business rates relief threshold increase from £15,000 to £25,000, in what would amount to a tax cut for small businesses, while the Digital Services Tax would increase from 10 to 12 per cent temporarily.
Business rates would then be abolished and replaced with a new, yet to be announced taxation system.
Labour’s new policy was praised yesterday by two of the UK’s largest business advocacy groups – the CBI and the Federation of Small Businesses (FSB) – in a move that will pile pressure on the Treasury to reform business taxation.
It comes after Reeves yesterday announced in the Sunday Times that a Labour government would adopt new fiscal rules that ban public borrowing to fund day-to-day government spending, while also creating a new Office for Value for Money to reduce waste.
Reeves is expected to say: “The [business tax] system we replace it with will incentivise investment, feature more frequent revaluations, and instant reductions in bills where property values fall, reward businesses that move into empty premises, encourage, not penalise, green improvements to businesses, and no public services or local authorities will lose out from these changes.”
In the current system, business rates are based on a company’s “rateable” property value.
Business groups have called for reform of the business rates system to take into account the advantage it gives to digital firms who have less of a physical presence.
FSB national chair Mike Cherry said: “This is what a pro-small business tax policy looks like.
“Business rates is a regressive tax which hits firms before they’ve made a pound in turnover, let alone profit, whilst disincentivising sustainable investment.”
CBI director-general Tony Danker said the “Labour Party should be applauded for grasping the nettle and putting forward a pro-growth, pro-investment package of reforms”.
Conservative party chair Oliver Dowden said: “Successive Labour leaders have threatened businesses with tax hikes, higher bills, and more red tape. Only the Conservatives can be trusted to support our businesses and help our economy thrive as we build back better.”