Empowering the Freelance Economy

Labour Party vows to abolish business rates

Rachel Reeves, Shadow Chancellor of the Exchequer and Labour MP for Leeds West
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The Labour Party is vowing if it came into majority power it would freeze business rates next year. Rachel Reeves, Shadow Chancellor of the Exchequer and Labour MP for Leeds West, made some bold statements about abolishing the current business rates system to replace it with something new that would make big businesses, such as large online retailers, pay their fair share in taxes so independent high street retailers and smaller business owners could pay less.

In Reeves’ Labour Party Conference Speech, she said the party was calling on the government to freeze business rates next year to increase the threshold for small business rates relief, giving small and medium sized businesses in all sectors a discount next year.

Reeves said: “To pay for those measures the government should increase the Digital Services Tax to 12% for the next year, to make sure online companies that have thrived during this pandemic are paying their fair share.”

The Shadow Chancellor n her Twitter video (watch below) coins high street shops as “the lifeblood of our communities”, which is true to some extent. But PMs have to look far beyond our high streets when they have to look into the limited company freelancers turned entrepreneurs that have survived and thrived without government suppport.

While we are on the subject, Jesse Norman, the Financial Secretary to the Treasury, said on September 10th in Parliament that funding for businesses affected by the COVID-19 pandemic that have not otherwise been eligible for existing reliefs will be available once the legislation relating to material change in circumstance provisions has passed and local authorities (LAs) have established their own local relief schemes.

According to Norman, “The Government will support LAs to do this as quickly as possible, including through new burdens funding. Formal guidance will follow in due course, setting out the specific considerations that LAs should have regard for when providing relief. Relief will be for LAs to award on a discretionary basis.”

Deputy leader Angela Rayner has set out Labour’s new deal for all workers.

  • Zero hours contracts banned
  • Fire and rehire outlawed
  • Sick pay increased
  • Maternity pay, parental leave and flexible working from day one
  • And a higher living wage with fair pay agreements going above and beyond the minimum

Where do freelancers fit into Labour’s new business tax system?

Many freelancers have built their businesses from home – not a property on the high street. They – some 4.5 million of them – are solopreneurs running their businesses as tax-efficiently as possible and have chosen to do so predominately to protect their personal assets, namely their home from any business failings through a limited company structure.

Rightly so, given most Brits anticipate that the equity they have built up in their homes over the lifetime of their mortgage will fund their retirement in some fashion when they downsize or rent it out. But many were left out of COVID-related government funding.

If you do decide to use your home as a business premise whereby you serve your clients or customers there, you could be impacted by any changes to business rates.

UK tax rules for home-based businesses

You do not usually have to pay business rates for home-based businesses if you:

  • use a small part of your home for your business, for example if you use a bedroom as an office
  • sell goods by post

You may need to pay business rates as well as Council Tax if:

  • your property is part business and part domestic, for example if you live above your shop
  • you sell goods or services to people who visit your property
  • you employ other people to work at your property
  • you’ve made changes to your home for your business, for example converted a garage to a hairdresser’s

Contact the Valuation Office Agency (VOA) to find out if you should be paying business rates. In Scotland, contact your local assessor.

Northern Ireland home business rates and rules

If part of a building is used for business and part for residential purposes – such as a shop with a flat above or a solicitor’s office in a domestic property – the part used for business counts as non-domestic premises. So, if you live and work in the same premises, you generally pay business rates on the part of the property used for business and domestic rates on the residential part.

Rental properties and business rates

Special rules apply to landlords, owners and tenants depending on the level of Capital Value for domestic properties or Net Annual Value for non-domestic properties. Rental properties and business rates.

Working from home and business rates

If you use your home as a workplace, the part of the property used for work may be liable for business rates. You will still have to pay domestic rates on the rest of the property. Whether you are charged business rates or not depends on the degree of business use. You are more likely to have to pay business rates if a room is used exclusively for business, or has been modified, eg as a workshop. Each case is considered individually.

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