The Federation of Small Businesses (FSB) has welcomed the Labour Party’s proposals to reform the business rates system.

During her speech at the party conference in Brighton, Shadow Chancellor Rachel Reeves outlined plans to increase the ceiling for small business rates relief to a rateable value of £25k, ahead of more fundamental reform

“The Shadow Chancellor is right to propose concrete reform of a business rates tax which disproportionately burdens the small businesses and sole traders at the heart of local communities,” said FSB chair Mike Cherry.

“It’s good to see that the Opposition has adopted our proposal to increase the ceiling for small business rates relief to £25k, which we submitted to the Government’s fundamental review. The gauntlet has been thrown down by the Opposition, and we hope Government Ministers are listening. This is what a pro-small business tax policy looks like.

“Business rates is a regressive tax that hits firms before they’ve made a pound in turnover, let alone profit, whilst disincentivising sustainable investment. This proposal marks a welcome call to action that would take more small businesses out of the regressive rates system and rightly looks ahead to more fundamental reform.”

Commenting on wider tax reform, Cherry added: “Tax simplification is long overdue. In taking it forward, avoiding unintended consequences is a must. It will also be crucial to make sure taxes designed for large firms aren’t simply avoided, with the bill forwarded to their small business customers. We saw this with the Digital Services Tax last summer, when Amazon passed the 2% cost onto small businesses, later followed by an increase in their payment terms to rub salt into the wound.

“Fundamentally, we must separate out the waste from the measures that truly incentivise investment, growth and the small firms that drive local economies forward.

“With regards to reliefs, even where helpful incentives and breaks for small firms are available, they often lack the time to get across them and can struggle with access due to bureaucratic systems. Simple, well-known reliefs, like the Employment Allowance, are the most important to maintain and expand.

“Complicated reliefs that take reams of accountants to access are less important than headline measures designed to make sure setting up a business, employing people and growing revenue is not so excessively penalised. This is one reason why the super-deduction should be improved or scrapped; with hardly any small businesses considering use of it, this is not a cost-effective measure to support most businesses.

“Whilst we look forward to continuing the conversation with the Opposition about tax, we are also pleased that the Shadow Chancellor looks set to address waste in public spending – particularly around procurement. For a long time, it has been clear that public sector procurement does not achieve the value the taxpayer deserves, so we are pleased to see the need for improvement recognised.”

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