New year, potential new UK Online Sales Tax

The Government published a Call for Evidence on 21 July 2020, as part of its Review of Business Rates, to gather views from stakeholders on all elements of the business rates system and a number of alternative taxes. This included questions on the scope and potential impacts of an Online Sales Tax. The Government concluded the Review at the Autumn Budget 2021 and announced that it will consult on a UK Online Sales Tax. The consultation will be published in the new year.

Currently it’s a fact that the high street is struggling and has been for a long time due to business rates, whilst ecommerce generally benefits from lower business rates as their warehouses are out of town in lower rated industrial parks. However the high street has been in decline for years and with larger retailers and supermarkets siting themselves in out of town centre retail parks it’s easy to see why. The attraction of free and ample car parking compared with the cost of shopping in town is just one of the multitude of reason people don’t find going to a high street with boarded up shops sprinkled between charity shops, betting shops, coffee shops, travel agents and the like that attractive any more. Cookie cutter shops which are the same in every town and city across the country make high street shopping something for the die hard consumer compared to the option many have taken – clicking a button and seeing the purchase arrive next business day by their friendly neighbourhood courier.

The real concerns of a UK Online Sales Tax is who will it apply to and will there be a threshold below which it’s waived? It would certainly be another barrier to entry to the micro business selling online – forget the financial implications and think about the paperwork as you decide which of your sales was online and which were down the market or took place in your shop. Then, even for the largest of retailers does click and collect count as online or is that to be treated as a simple reservation for an in-store purchase? Any UK Online Sales Tax will be fraught with complications and doubtless in the upcoming consultation will have large retailers lobbying to be treated as special cases. Don’t forget, this comes on top of the much hated Digital Service Tax which has already been passed on to small businesses by some of the largest marketplaces and and they are likely to do the same with any UK Online Sales Tax if they can get away with it. (Special shout out to eBay who absorbed the Digital Sales Tax and, as was intended, didn’t pass it on to eBay sellers!)

The Government will use this consultation to explore the arguments for and against introducing a UK Online Sales Tax. That includes evaluating the economic impacts of such a tax and assessing any potential concerns. If you want to have your views heard, keep a look out for the consultation when it is opened next year.

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