Labour has said it would scrap business rates and close a number of tax relief schemes which the party contends do not benefit the public or the economy.
Shadow chancellor Rachel Reeves is set to announce that a Labour government would immediately cut the business tax, before eventually phasing it out completely.
She will say: “Our high street businesses do so much to enrich our lives and our communities, facing huge adversity in the past year. They are struggling right now, with a cliff edge in rates relief coming up in March.
We will carry out the biggest overhaul of business taxation in a generation, so our businesses can lead the pack, not watch opportunities go elsewhere
Shadow chancellor Rachel Reeves
“The next Labour government will scrap business rates.
“We will carry out the biggest overhaul of business taxation in a generation, so our businesses can lead the pack, not watch opportunities go elsewhere.”
Ms Reeves will tell Labour’s conference in Brighton that the current business rates system punishes investment, entrepreneurship and the high street.
And she will also announce that the party will reform tax reliefs and drop those which do not benefit the taxpayer or the economy.
Labour will tax fairly, spend wisely, and get the economy firing on all cylinders.
— Rachel Reeves (@RachelReevesMP) September 26, 2021
She will say: “There are hundreds of different tax breaks in the system.
“Some are important but too many simply provide loopholes for those who can afford the best advice.
“For businesses they create extra layers of complexity to navigate, and added together they cost more than our entire NHS budget.
“We will look at every single tax break. If it doesn’t deliver for the taxpayer or for the economy then we will scrap it.”
— Keir Starmer (@Keir_Starmer) September 26, 2021
Labour’s business tax reform would look to shift the burden from the high street to online giants, and end the tax relief afforded to private schools due to their charitable status.
The party would also aim to raise £440 million by closing the carried interest loophole which relates to private equity fund managers and the share of profits made by investment deals.
Ms Reeves said: “Labour will tax fairly, spend wisely, and get our economy firing on all cylinders.”
The changes were welcomed by business groups.
National chair of the Federation of Small Businesses Mike Cherry said: “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.”
He added: “Business rates is a regressive tax which 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.”
Tony Danker, CBI director-general, added: “Change to this outdated system is chronically overdue.
“The Labour Party should be applauded for grasping the nettle and putting forward a pro-growth, pro-investment package of reforms that will reflect our green ambitions, spur the economic recovery, and help level up our regions.”