ICAEW’s representation, published as ICAEW REP 40/22, expresses concern that the basis of the consultation appears to focus on addressing the imbalance of the costs of business rates borne by retailers with physical premises, versus the lower establishment costs of e-commerce sellers. This will likely make the debate more complex.
A s a starting point, ICAEW suggests that the policy discussion could look at how online businesses should be taxed. This would likely facilitate a more holistic look at the tax system and creates fewer constraints.
ICAEW’s representation also highlighted significant uncertainty that an OST would address the imbalance created by the business rates system for retailers with a physical presence. Many retailers now operate a hybrid model with some online sales and some high street shops.
For them, the savings on business rates may not even match the increased tax burden from an OST. Indeed, some retailers may find themselves worse off. This could be exacerbated if landlords increase rents following the reduction in business rates. It means that any tax savings would effectively be passed to the landlord.
ICAEW also voiced concern around the complexity that a new tax regime would bring, at a time when there is already substantial change in the pipeline. Given HMRC’s commitment to becoming one of the most digitally advanced tax administrations in the world, this demand on resources is likely to be high to ensure appropriate reporting and software procedures are in place.
Implementing another tax regime will require significant investment from businesses to meet their compliance requirements. HMRC would need to ensure that businesses have clear guidance and enough time to meet their obligations. Without this direction, many will struggle to accurately report an OST. This issue would disproportionately affect smaller businesses that do not have large in-house tax teams.
Tax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
More support on tax
ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.
Sign up for TAXwireJoin the Tax FacultyThe future of tax after COVID
As digital technologies transform society, the UK government is grappling with balancing the books while ensuring its tax system is fit for purpose. Join us as we take a look at the issues and challenges facing the tax system.
Read more