Scrap business rates: A reason to vote for Labour?by
Shadow Chancellor of the Exchequer Rachel Reeves is proposing to review tax reliefs and replace business rates. The Imprudent Accountant reviews the latest tax pledges coming out of the Labour conference.
There is probably a large consensus amongst members of the public, not to mention accountants, holding the view that the current opposition to Boris Johnson’s government is weak and gives the impression of being unelectable.
Having just finished reading Peril, the third book in Bob Woodward’s series about the Trump years, I’m beginning to think that like “sleepy” Joe Biden, Sir Keir Starmer’s greatest strength might lie in antipathy for his opponent rather than his own skill set or charisma.
The much-maligned Donald Trump was proud to describe Boris Johnson as a kind of mini or cut-price version of himself and, at times, one wonders whether the UK’s U-turning Prime Minister might ultimately be Labour’s greatest asset?
An attack on tax reliefs
However, at its party conference this week, Shadow Chancellor of the Exchequer Rachel Reeves might have come up with a secret weapon that will appeal to bean counters up and down the country.
She is preparing to launch an attack on tax reliefs, claiming that 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.”
This is music to my ears. For years I have been batting on about the need to simplify our horrendous tax system, which stretches to thousands of unintelligible pages of statutory legislation many of which should long ago have become obsolete and is then supplemented by case law.
Some accountants might disagree, since the complexity provides numerous loopholes that enable canny advisers and their clients to, as Reeves might put it “cheat the Exchequer”, or in more polite tax adviser parlance “minimise liabilities in accordance with the strict wording of tax legislation”.
However, the idea that we might be able to slim down the tax library by removing vast swathes of poorly drafted and badly directed legislation should bring a smile to the face of anyone who ever advises clients on tax.
The Office of Tax Simplification has done its best in the teeth of opposition from politicians who favoured its existence, without ever wishing to take its advice. Presumably, were Labour to get elected, that might change with a vengeance.
The shadow chancellor has particularly set her sights on tax reliefs, especially those that favour what she regards as the wealthy.
Realistically, any changes would take years to arrive and might allow for the industry to help clients arrange their affairs in the optimum fashion, so we shouldn’t be too worried at the moment.
In the longer term, her ideas might presumably mean that the Budget deficit could be reduced relatively painlessly for almost all taxpayers, even some of those who are deemed wealthy by almost any measure.
Scrap business rates
At the same time, the shadow chancellor announced a proposal to reduce and then scrap business rates. This will benefit our own businesses and appeal to around 95% of clients or for any of us who operate smaller practices, 100%, since those that are most likely to suffer as a result of this change would be the extra-terrestrial multinationals, who currently pay what very few would regard as their fair share of taxes.
In reality, as the first paragraph hinted, Rachel Reeves is free to propose what she likes but unless her party can get elected it won’t make the slightest difference.
However, there has to be a chance that Rishi Sunak is taking some detailed notes and might decide to make some changes of his own, which would have a different slant but could also point towards tax simplification and a rebalancing of the rates system for businesses.