As an eCommerce business, you will be relieved there was no introduction of an online sales tax in Autumn Budget 2021. With a busy golden quarter on the horizon there will be no pressure on margins from the Treasury just yet.

In the small print, however, the indication was that the mechanics of such a tax are being explored, so watch this space come the next Budget.

Still, a rebalancing act was performed

Of course, the dual reasons why such a tax is mooted are both to level the playing field for bricks-and-mortar retailers and bring in lost revenue for the Treasury. 

By way of example, Amazon has a tax to turnover ratio of 0.37%, compared to 2.3% for bricks-and-mortar retailers. 

This is clearly a competitive disadvantage to traditional retail and a black hole for government finances. One which, say, a 2% online sales tax might fill nicely as and when it is introduced.

But, for now, Chancellor Rishi Sunak has introduced short-term measures in a bid to level the playing field for bricks-and-mortar retailers, starting with the business rate reforms in England. 

If, as an online-only trader, the concept of business rates has passed you by, they are a property tax on business premises roughly based on its rental value. So, what has the Chancellor done?

Reforms in Autumn Budget  2021

The Autumn Budget made changes to business rates to help high streets. For the 2022/23 tax year, key changes to business rates in England include:

  • freezing the business rates multiplier: the multiplier for 2022/23 will remain at 51.2p, and the small business multiplier at 49.9p.
  • 50% relief for eligible retail, hospitality and leisure properties up to £110,000 per business.
  • 12 months’ relief from higher business rate bills caused by any improvements to an existing property. This relief will run from 2023-2028. 
  • An exemption from business rates for eligible plant and machinery used in on-site renewable energy generation and storage. These include solar panels and battery storage for electric vehicle charging points. 

These measures should give businesses confidence to invest in their properties. 

What do these reforms mean for eCommerce?

While there is not the immediate shock of an online sales tax to contend with, it is probably worth giving some thought to one being introduced sooner rather than later. 

A rate of 2% appears to be being discussed, and there is also talk of potentially splitting it to be derived from both online sales and consumer delivery.

If they do as intended, the business rate reliefs will help your bricks-and-mortar rivals become more competitive.

Interestingly, Amazon has ventured into bricks-and-mortar operations where it suits: Till-less grocery stores in London and so-called four-star stores, which only sell goods rated at least four stars by online customers. The first of these in the UK has opened in the Bluewater shopping centre in Kent.

As the retail landscape changes, keep an eye on your distribution channels and the costs and taxes associated with them to ensure that you are making the most of new opportunities and are not caught cold by any threats. 

It would be a massive leap to follow Amazon into bricks and mortar as the metaphorical playing field levels, but it may be right for some. Or it may be a prompt to find high street retail partners you can work with.

If you want to discuss changing tax rules and how they will affect your business, please do not hesitate to get in touch.