LABOUR LEADER Ed Miliband has announced his party’s plan to freeze business rates for small firms across the UK.
Miliband revealed his latest initiative at the Labour Party Conference in Brighton this week, which could give a boost to up to 1.5 million small businesses in the UK.
The party says it would pay for this shortfall in revenue by reversing a planned cut in corporation tax from 21% to 20%, which is due to come into force in April 2015, according to BBC News.
The step would affect any small business with a rateable value of £50,000 a year or less and it is estimated that those businesses would see a saving of around £450 across two years, with some companies saving up to £2,000.
But at an estimated cost of £250 million in 2015/15 and £540 million in the following year some are questioning the viability of the plan.
Concerns have also been raised over how the scheme would be implemented for chain or franchise businesses – prevalent in the casual dining and hospitality sectors – which might exploit the tax break by setting up subsidiaries that fall within the bracket.
Groups such as the CBI have also expressed anger over the plan to scrap the reduction in corporation tax, which comes into effect in 2015, to pay for the scheme which they say is a tax increase on investment, jobs creation and research.
The move has been welcomed by many across the retail and hospitality sector, and comes just as thousands of pubs and restaurants across the UK cut their prices by 7.5% in protest at current tax levels.
The ‘Tax Parity Day’ campaign, organised by a French lobby group, aims to show that a cut from 20%, which is paid on food consumed in pubs and restaurants, to the reduced rate of 5% would generate an extra £1.5 billion in taxes in just three years and create 600,000 new jobs across the UK.
Currently only food consumed in pubs and restaurants is subject to the tax; food bought from retailers is zero-rated.
Campaigner Jacques Borel said: “Our aim is to secure more equal tax treatment for food sold through pubs, restaurants and food service operators, compared to supermarkets, which benefit from a zero VAT rate.”
“We are calling on supporters of the campaign to reduce their prices by 7.5% for one day. This is the amount by which we believe that prices would fall if VAT were cut to 5%, on the assumption that 60% of any reduction would be passed onto the customer in lower prices.
“So, for example, the total price of a meal and drinks for a family of four would be reduced from £50 to £54.60 on Tax Parity Day.”
Borel added that cutting VAT by 7.5% would boost turnover, increase sales and attract more customers: “Our argument is clear – a reduction in the level of VAT on a long-term basis will generate growth and create jobs in the important leisure and hospitality sector.”