Corporate Affairs

Can your business afford to pay more tax? Your input required

The Treasury has opened a consultation on whether the UK should roll out an Online Sales Tax – and you have until Friday 20th May to give your feedback. Find out more information below, as well as links to view the document
10th May 2022
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Corporate Affairs Can your business afford to pay more tax? Your input required

The Treasury has opened a consultation on whether the UK should roll out an Online Sales Tax. If you have an owned or operated business in the UK, we encourage you to read the document linked below and respond to the consultation, particularly if you have a strong e-commerce offering.

The deadline to respond is 10am on Friday 20th May.

This consultation follows a 2021 review of the business rates system, which concluded that the system should be retained on the basis that there is no alternative with widespread support that would raise sufficient revenue to replace business rates.

The aim of the Online Sales Tax (OST) – which is distinct from the Digital Service Tax – would be to level the playing field between retailers who are burdened with high business rates through their bricks-and-mortar estate and retailers who are online only.

By imposing a levy of 1 or 2 per cent on goods bought online the Government would seek to rebalance the tax system by funding business rates relief in England for the retail sector. However, the Government’s own consultation document acknowledges that an OST levied at 1 per cent or 2 per cent would not raise sufficient revenue to replace in full the business rates levied on retailers which totals £7.5 billion annually.

The decision of whether to establish an OST has not been made and given the complexity of the issue the Government is keen to hear from businesses that would be impacted (and that would be every retailer that has a direct-to-consumer e-commerce operation in the UK) to help shape the final outcome.

The consultation document contains 40 questions and is divided into About, Scope, Design and Impacts and it poses questions such as should an OST include goods as well as services, how should an online sale be defined and even how do you define a UK customer.

The proposed OST has both supporters and critics with the former arguing that an online sales tax would help level the playing field and ensure the big international companies are at least paying some tax. Critics say that adding more tax rather than credibly reforming the existing structure is damaging to both business - particularly small businesses who are already struggling to recover from the pandemic - and the consumer and that making things harder for online retailers is not the answer to saving the high street. 

It is important for businesses to understand the potential implications an OST may have on their operations and respond accordingly.

Read the consultation document and to respond to the consultation here.

If you have any questions, please contact Charlotte Keesing or Carly von Speyr.

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