It is nearly time for the Chancellor’s Autumn Budget and many of us in the retail sector are wondering what it will contain – particularly in relation to Business Rates.
Fairer bricks and mortar business rates
Business rates are a levy from a non-digital world but is the way it operates still fit for purpose? Is it fair on bricks and mortar retailers – many in the industry think not?
Retailers operating with physical stores cite business rates as one of the main cost headwinds they face and feel that they are paying a disproportionate amount, compared to retailers operating on-line only.
Stop meddling – just fix them
In 2016-17, business rates raised around £29bn; equal to 4.5% of the entire UK tax take. A vast amount of revenue and one that may be difficult for any Government to replace in its entirety.
The Government has attempted several measures towards reforming business rates, for example, changing the rate of increase from RPI to the lower CPI and alleviating any charge on properties with a rateable value of £12,000 or less. Furthermore, some councils were given leeway to raise or lower rates and given a little more control in how the revenue was used. We understand that the Chancellor may increase the zero charge to properties with a rateable value of £20,000 or less – which while very welcome, does not help those retailers with larger estates.
All we are seeing is the Government tinkering with business rates and not implementing any proper solutions. The only answer is to completely overhaul them and bring them into line with trading in the 21st century.
Do more than a digital tax
The Chancellor has recently spoken about introducing a digital tax to ensure e-tailers pay a fairer share of tax. However, this would not only penalise online-only businesses but would also affect retailers who have both physical and digital sales channels. Perhaps the answer lies in ensuring retailers pay UK corporation tax if they are making profits in the UK from their sales directly to UK customers; rather than the retailer paying tax in a different tax jurisdiction.
It doesn’t seem fair to levy on-line retailers, which itself is a credible business model and not just one set up to minimise tax, for the sake of delaying any reforms to business rates. Retail and our world is rapidly evolving and so must our tax system – so be bold Chancellor!
We will be keeping an eye on the Autumn Budget as it is delivered on 29 October. You can look out for updates on our Budget Hub. In the meantime, if you would like some advice relating to your retail business, please get in touch with Wilkins Kennedy’s retail and wholesale team to see how we can help.