Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what recent assessment he has made of the adequacy of the level at which (a) business rates and (b) VAT are set for (i) micro businesses and (ii) small and medium sized enterprises in the hospitality sector.

The recent revaluation of business rates, which came into effect on 1 April 2023, ensures rateable values, and therefore bills, more accurately reflect current market values.

The Government has announced a package worth £13.6 billion over the next five years to support businesses with the revaluation. This includes an increased 75 per cent relief for retail, hospitality and leisure properties, up to a cash cap of £100,000 per business for 2023-2024. This is a tax cut worth over £2 billion for around 230,000 RHL businesses, to support the high street and protect small shops.

Regarding small and microbusinesses in particular, the Government has continued its generous Small Business Rate Relief scheme which means properties with a rateable value below £12,000 (over a third of properties, 720,000) pay no business rates at all, with an additional 76,000 in the taper, with a rateable value below £15,000, benefitting from reduced bills.

The Government recognises that accounting for VAT can be a burden on small businesses. This is why, at £85,000, the UK has a higher VAT registration threshold than any EU Member State and the second highest in the OECD. This keeps the majority of UK businesses out of VAT altogether (3.1 of 5.6 million). Of the 2.5 million businesses that are registered, 1.2 million exceed the threshold, and roughly 1.3 million are registered voluntarily.