Labour’s shadow business secretary has called for emergency assistance to be offered to small limited companies ahead of upcoming changes to business rates. Rebecca Long-Bailey described rates as a “ticking time bomb,” and said that many smaller companies would face “cliff-edge” increases when the changes come into effect from April.
The start of the new tax year in April will also see a revised system for business rate valuations come into effect, and Long-Bailey believes that this has been a poorly-handled process that will leave smaller businesses facing “sharp and unmanageable” rate hikes. “It cannot be right,” she said, “for smaller town centre retailers to be facing massive hikes while the Amazons and the ASOSs of this world have their business rates cut.”
A spokesperson for the government defended the changes, saying that they would ensure a “fair deal” for all businesses. The government also said that it had set aside a fund worth £3.6 billion to provide transitional support to businesses who will face major increases in their rates as a result of the reforms.
The spokesperson said: “A government spokesman said: “The revaluation is designed to bring rates into line with changes in the rental property market and ensures business rate bills more closely reflect the property market and that all businesses are getting a fair deal.”
Labour has proposed a system under which a three-year fund worth £150 million per year would be established to provide financial support to businesses facing the risk of bankruptcy as a result of the changes. Central government would supply the funds, but local councils would be responsible for delivering the money to businesses under powers that are already established. This has been proposed by Labour as a shorter-term solution, but in the longer term the party believes that the system needs major reform at a fundamental level to reduce the burden faced by smaller businesses.
The Federation of Small Business (FSB) carried out a survey of its members which lends considerable support to Labour’s claims that the reforms will represent a burden to smaller firms. Of the 675 FSB members surveyed, 36% of respondents expected an increase in their rates under the new system. Of those who did face higher rates, the survey said, roughly a fifth would consider completely closing their doors as a result. 44% expected the increase in their rates to eventually hit £1,000 per year, with around a fifth expecting an increase over 40% on their current payments.