Autumn Statement

Rates reform boost, online sales tax plan dropped

Xmas Day shopping online
An online sales tax will not be introduced

Retailers in Scotland are demanding the Scottish Government follows the Chancellor’s move to freeze the business rates multiplier in England which was described as an important step towards a more fundamental review of the tax.

The UK government also said it will not introduce an online sales tax (OST). Online retailers will see the business rates bills on their warehouses rise by 27%.

By way of rebalancing the sector, some high street retailers will see their bills fall if the valuation of their shops drops. Transitional protection will be in place for those whose bills rise. The government said only 9% of properties in England will see a bill increase of more than 15% in 2023/4.

David Lonsdale, director of the Scottish Retail Consortium, said: “At the very least Scottish Ministers must follow suit and match the Chancellor in freezing the business rate here in Scotland in the coming year.”

He added: “3,000 Scottish retail premises already pay a higher business rate than counterparts and competitors down south due to the Higher Property Rate. It is unconscionable that even more stores could end up paying a higher business rate than applies in England.”

On the decision to drop the online sales tax idea, Chris Sanger, EY’s head of tax policy, said: “The OST was proposed as part of an effort to fund a reduction in business rates for physical retail stores and instead the Government has relied upon the revaluation in April next year, based on 2021 values.

“Following the revaluation, the total business rates paid by retail will fall by a fifth, while the rates paid by large distribution warehouses will increase by 27%.

“The effect of the revaluation may dampen down some of the calls for reform, but this doesn’t necessarily address the fundamental issues inherent in business rates.

“Many will still argue that this is a ‘colour-blind’ tax, being one that is paid whether profits are in the black or the red, and needs to be more closely linked to ability to pay rather than the rental cost of property.

“This may yet be an issue the Chancellor is forced to return to, like many of his predecessors.”

Relief for 230,000 English businesses in the retail, hospitality and leisure sectors was also increased from 50% to 75% next year.

To help businesses in England adjust to the revaluation of their properties, which takes effect from April 2023, the Chancellor announced a £1.6 billion Transitional Relief scheme to cap bill increases for those who will see higher bills. This limits bill increases for the smallest properties to 5%.

Helen Dickinson, chief executive of the British Retail Consortium, said the action on transitional relief “represents the first step towards a more fundamental reform of the broken business rates system.”

For a restaurant chain with 400 restaurants with a rateable value of £45,000 each, it means support worth around £2.7 million over the next five years.

A typical small shop with a rateable value increasing from £20,000 in 2017 to £21,500 in 2023 will receive Retail Hospitality and Leisure (RHL) relief worth around £8,000 (subject to the £110k cash cap per business).

A typical pub with a rateable value decreasing from £31,900 in 2017 to £27,600 in 2023 will receive RHL relief worth over £10,300 (subject to the £110,000 cash cap per business).

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