Online Sales Tax
Businesses providing a large proportion of their services via online platforms may have to plan ahead to bear an online sales tax levied at 2% of sales. The existential crisis facing the high-street and public outcry for lower rates has meant, the treasury has been seeking alternative means of financing the gaping hole left by the coronavirus as well as compensating for the lost revenue from reducing business rates. The outcome of existing evaluations for the proposal is likely to be decided upon come autumn when the economy should be in a recovery phase provided the existing vaccination drive proves successful.
Currently standing at 51% of rateable value, the figure could drop to levels last witnessed in the 1990’s at 35%. This may present invaluable savings in costs for businesses with a large network of brick-and-mortar stores and/or those who don’t have an online channel of distribution such as supermarket chain Aldi, Primark, and more. In contrast, companies such as Amazon, John Lewis, and other retailers have pivoted their business models from being branch-intensive to digital-intensive.
Nevertheless, whether this leads to a reversal of many retailers’ decision to open up virtual offerings will depend upon other cost savings such as high-street rents and incremental costs of selling online such as logistics and handling returns. The current shortage of drivers due to the upsurge in online shopping for groceries to more specific customer needs further exacerbates cost-efficient delivery concerns. Retailers are also using this opportunity to renegotiate their rental contracts in order to include a condition for turnover-related rent rather than having rent be a fixed cost paid monthly or annually.
Seek to better understand your tax liability and how to optimise business strategies to minimise tax payable, then contact us as soon as possible using the “Contact Us” tab on the top-right of the page or book a 15 minute free consultation with our partner to become aware how we can add value to your business.
