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Public consultation for online sales tax

The Government has opened a public consultation into a new online sales tax (OST). This is expected to “rebalance” the taxation of online and in-store retail businesses.


The Treasury published its consultation on 25 February 2022. It aims to seek answers from stakeholders on 40 questions about how an OTS should work.

If actioned, the Government would use an OST to lower the business rates of retailers with properties in England. Then put more funds into the block grants of the devolved administrations.

Supporters of an OST say in-store retailers pay an unbalanced share of business rates, making physical businesses less competitive.

But critics say an OST would be a misplaced tool to help high street businesses. The convenience of online shopping may partly explain the struggles felt by in-store retailers.

However, the Government has been trying to help retailers with their business rates. They recently announced a range of relief in the Autumn Budget 2021.

The Treasury did not flesh out any specific plans rates or thresholds. They said they must define the scope and design of an online tax first.

The Federation of Small Businesses

Mike Cherry, national chairman of the Federation of Small Businesses, said:

“Efforts to level up the tax playing field between corporates that mostly operate online, paying low business rates on out-of-town warehouses, and community small businesses, which are up against high rates on high streets, are to be encouraged.

“But the Government must avoid simply adding further cost pressures to small firms that have increased their online presence to keep the show on the road over lockdowns.”

John Cullinane, director of public policy at the Chartered Institute of Taxation welcomed the consultation. He said it was a good idea “as opposed to simply going ahead with a new OST”.

But we would like the Government to be clearer about the objectives of the online sales tax,” he continued.

“Is the Government content that while evidence shows that business rates today are ultimately mostly borne by landlords, the online sales tax would be very largely borne by consumers in higher prices?”

If you would like more information on this, you can see it on the government website here. If you have any concerns about how this may affect your business, we are here to help. Use our form below to enter your details. You can also get in touch with your usual Jack Ross contact.

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