The UK government has recently run a public consultation on a potential new Online Sales Tax. The consultation period ran from February 2022 to 20 May 2022. The results are currently under review.
COVID has had a big impact on how we shop, work and generally interact, but even before COVID the retail sector in the UK was on its knees. It is inevitably very hard for a typical high street store to compete with the innumerable online offerings available, when they suffer significant financial burdens relating to running a premises, namely rental payments and business rates. In an effort to redress this relative unfairness and simultaneously boost local economies, the government are looking at an online sales tax, the revenue raised from which would go towards subsidizing business rates.
The issues being deliberated:
• What transactions are going to be covered – should such a tax cover only orders placed on a web platform, or should they cover all remote sales whether by way of email, telephone or mail order?
• Goods or services? – it is understood that such a tax would cover goods, however the consultation considers whether services should also be included
• How will the tax be charged ?– it could be charged on a revenue basis for instance 1-2% of turnover, or it could be charged on a flat-fee basis for instance a fee for each online sale.
The majority of business, whether selling goods or services and whether or not they own or trade from a premises, are operating to some degree ‘online’. The scope of such a tax is therefore difficult to determine.
Given the current explosive levels of inflation, is this the right time to consider making the purchase of goods even more expensive for consumers?
Should the taxpayer be subsidizing an outmoded system of commerce, or should we be embracing the cultural change that has taken place and review other ways to regenerate local economies?
We will update you when the government publishes its conclusions and potentially its plans.
Brona MacDougall, Partner