The FSB has hit out at Mr Corbyn’s proposals to increase corporation tax from the current 19 percent rate to 26 percent in the next two years. Under the left-wing leaders radical plans, businesses would be ordered to pay 21 percent corporation tax from April 2020, 24 percent from April 2021 and 26 percent from April 2022. The most striking announcement from the party was its attack on small businesses, with a turnover of less than £300,000 a year, who would now be subjected to a 21 percent corporation tax rate by 2022 – an increase of two percent.
Corporation tax is paid by all limited companies and is deducted from the profits a business generates.
Mike Cherry, FSB National Chairman, has said the plans announced in Labour’s 2019 manifesto is a “disappointment” and insisted it goes against a pledge Mr Corbyn made to members in at the start of the new financial year two years ago.
Labour has also made a commitment to introduce a £10 an hour Real Living Wage for all workers over 16-years-old and Mr Cherry highlighted small firms are already struggling to cope with the surge in wages and a rise in taxes “would make a bad situation worse”.
Jeremy Corbyn has pledged to raise corporation tax
In 2017, the Labour leader addressed members of the FSB – an organisation representing small and medium-sized businesses – and made it clear any tax rise “will fall most heavily on those with the broadest shoulders” and made it clear small business would not see any rises.
Mr Cherry told Express.co.uk: “While Labour’s pledge to introduce a lower corporation tax rate for small firms is of course welcome, an increase is a disappointment – particularly as we had a promise in 2017 that our members wouldn’t face any rise at all under a Labour government.
“Small business owners have already been hit by a 60 percent drop in the dividend allowance last year.
Labour has announced plans to raise corporation tax to 26 percent
“Confidence among small firms is already suffering an unprecedented losing streak. Increasing their corporation tax rate – on top of a surging National Living Wage – would make a bad situation worse.”
An FSB spokesman added: “Jeremy Corbyn spoke to FSB members in 2017 and said that small businesses wouldn’t see a rise in corporation tax.
“We would want this pro-small business commitment to be maintained.
“On tax, we’re calling on the next Government to prioritise preventing small businesses from paying tax before profit through business rates, and helping with the cost of employment through reducing the jobs tax.”
Labour would raise corporation tax for small businesses by two percent
In an address to FSB members in London on April 11, 2017, Mr Corbyn said: “Any tax rises will fall most heavily on those with the broadest shoulders and will be a something-for-something deal. When we ask for more contributions we’ll be clear about what you’re getting in return.
“Secondly, we want to level the playing field to ensure that no one is being held back due to unfair advantages of the economically and politically powerful using their entrenched positions to hold back the enterprise of others.”
Mr Corbyn added: “Let me look at those points in more detail.
Jeremy Corbyn has said he has produced a ‘manifesto of hope’
“When I say any tax rises will fall on the broadest shoulders, I want to make it clear today that we will not raise the small business corporation tax rate.”
John O’Connell, chief executive of the TaxPayers’ Alliance, said as a result in the hike in taxes, business can “kiss goodbye to the investment we need for post-Brexit prosperity”.
Tax expert Genevieve Morris, a partner at accounting and tax advisory firm Blick Rothenberg, said the corporation tax hike was “really disappointing, but not surprising”.
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An outline of the major spending in Labour’s manifesto
The Labour Party has said around half of the proposed £83 billion tax rise to pay for investment in public services is set to come from a hike in corporation tax.
Speaking at the launch event in Birmingham, Mr Corbyn said it was a “manifesto of hope” that would bring to an end a system “rigged” in favour of “the billionaires and the super rich”.