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Prospective Chancellors trade blows on tax reform at small business hustings

The Conservative Chancellor Sajid Javid, the Shadow Chancellor John McDonnell and Deputy Leader of the Liberal Democrats Ed Davey have made fresh pledges to small firms at a hustings event hosted by the Federation of Small Businesses (FSB) in Westminster.  

During the discussion, John McDonnell promised to match the Conservatives’ commitment to “enhance” the discount on national insurance bills that small firms can access through the Employment Allowance. The party had pledged to support small businesses struggling with rising wages but had not, to date, revealed what form this support would take.  

He also described the UK’s late payment culture as “brutal” and “appalling”, and committed to ending the late payment crisis through following Australia’s binding arbitration model. The Shadow Chancellor refused to be drawn on exactly which business incentives and reliefs would be assessed as part of reforms under a Labour government, entering into a heated exchange with his opposite number about the implications of planned changes, particularly for family businesses.

He confirmed that small businesses would face a higher corporation tax rate under Labour, saying the party had been “straightforward about that”. McDonnell also claimed that small business owners would be protected from Labour proposals to reform dividend taxation.    

Sajid Javid committed to creating a positive tax environment for small businesses. He doubled down on pledges to extend the business rates Retail Discount and committed to making the appointment of a properly empowered Small Business Commissioner a top priority for a Conservative government. Elsewhere, he promised that a new UK Shared Prosperity Fund would at least match the value of current EU funding streams.  

On being questioned about proposed changes to IR35 rules set to take effect in April of next year, Javid revealed that a Conservative government would keep the reforms “under review” to ensure they are having the “intended impact”, but stopped short of committing to a delay.

He also refused to be drawn on whether a Conservative government would enforce a £30,000 salary threshold for international workers looking to come to the UK after Brexit.   

Ed Davey stated that – through a combination of the loan charge, IR35 and a 60% drop in the Dividend Allowance last year – the government has been singling out the self-employed. Reflecting on his own experience of self-employment, he stated that the drop in the allowance had hit him hard, and current IR35 reforms were having “unintended consequences” and are reflective of “sloppy thinking”.

Davey also argued that the Conservatives’ proposed ‘tax lock’ would incentivise an underfunded HMRC to take a more aggressive approach to small businesses in order to recover sums due. He stated that he had seen an increase in the number of small business owners within his constituency complaining about the tax authority’s hostile approach.

He closed by underscoring his party’s commitment to “stop this damn Brexit”.   

Responding to the discussion, FSB National Chairman Mike Cherry said: 

“Members will make up their own minds about what they’ve heard here today – certainly, there are plenty of kind words going around.

“Every major party has shown a willingness to draw from our manifesto, and we’re grateful for that.

“What’s critical now is that every one of the UK’s 5.8 million small businesses is heard at this election. The deadline to register is today. We’re encouraging everyone to make sure their name is down and they’re able to make it to the ballot box on 12 December.”

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