The Treasury completes its consultation on introducing a new Online Sales Tax (OST) soon. First promised by the Chancellor in his 2021 Budget, it's looking at the pros and cons of an OST ...
The pandemic changed the way we shop, so the Treasury just completed an Online Sales Tax consultation!
No firm decision has been made as to whether an OST is a good idea, let alone if and when it would be implemented, but the changes in the retail sector due to the pandemic mean the time is right to take a serious look.
"Why is an Online Sales Tax being considered?"
Shopping footfall stopped completely during pandemic lockdowns and has struggled to improve ever since. Everyone turned to online purchases instead which has frightened bricks and mortar retailers as they have large amounts of business rates to pay for their premises. Online retailers invariable have a lot less to pay on lower value out of town warehouses.
The Government has announced it is keeping business rates 'as is' for now, but now considers an OST to be a good way to balance taxation within the retail sector between online-only and high street retailers. Options on the table also include reducing business rates for high street retailers and additional block grants to cover any changes will be given to the devolved administrations in this case.
There are also issues in deciding who would pay an Online Sales Tax. If a purchase is made in-store using an app or via an online reservation then collect, well, would that be included? Does Click & Collect count? How about phone, mail order and even voice-enabled apps like Alexa?
"And should OST apply to services as well as physical goods?"
If it was to apply to physical goods only, the Treasury has said there are areas of difficulty when it comes to the likes of takeaway food delivered to the home which could be considered catering rather than the supply of goods for VAT purposes.
If it did cover services, would that include estate agents, or even gambling sites competing with high street outlets? How about bus and rail tickets that can be booked online? It seems to be a complex area to think about, hence the Treasury's consultation.
And if that wasn't all confusing enough, the Treasury asks the following about OST:
Should the OST be payable by the vendor, or the consumer?
For sales through online marketplaces, should it be the operator of the marketplace that is liable to the OST rather than the vendor (the current approach for accounting for VAT on such sales)?
How would cross-border sales to UK customers be treated?
Should the tax be based on the revenues generated from online sales or as a flat fee?
Would a threshold be appropriate so that smaller businesses, and/or those with limited online sales, do not have to deal with the OST?
How often would returns and payments be due? The Treasury prefers quarterly reporting, but asks for thoughts on whether reporting periods based on the tax year or another annual period might be more suitable.
What data and systems changes might be required to implement an OST, and how much of an administrative burden would it create for the sector?
Although the consultation closes on the 20th of May 2022 there is still time to have your say, It's expected the Government may soon decide whether to continue with an Online Sales Tax. It's a completely new concept as there's no precedent anywhere in the world so the United Kingdom is leading the way again.
It'll be very interesting to see what the Government decides.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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