Finances 2021 and what it means for small enterprise
Originally written by Timothy Adler on Small Business
Rishi Sunak is set to extend furlough and other Covid support for small business in next month’s Budget 2021 on March 3.
The chancellor is almost certain to also extend the current business rates suspension for many small businesses, while setting the scene for an online sales tax all retailers may have to pay later in the year.
In July it was revealed that the Treasury was considering a 2 per cent online sales tax to raise £2bn a year, giving physical shops an advantage when it comes to purchases made instore.
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Recent polling by Kekst CNC found that an online sales tax would be the most popular way of recouping some of the costs of the Covid crisis: 56 per cent of voters want online retailers to pay more tax.
One idea is that small businesses that sell online could offset their business rates against the online sales tax, giving high street shops a boost.
Meanwhile, 18 companies and organisations including Waterstones have urged Sunak to introduce a digital sales tax while reducing business rates.
Business rates are assessed every few years and based on rent levels from two years earlier, with the outcome of the next assessment scheduled for 2023. The current rate is 50 per cent of market rent, which Vivienne King, chief executive at lobby group Shopkeepers’ Campaign, told the Financial Times made it the largest fixed cost paid by UK retailers.
Reducing business rates would “level the playing field” between bricks-and-mortar shops and online retailers, the signatories said, as the coronavirus pandemic accelerates the already growing popularity of internet shopping.
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Excluding food, the proportion of retail sales made online jumped from 31 per cent to 46 per cent last year, according to data from the British Retail Consortium and KPMG.
Online-only retailers currently pay a lower tax rate than physical small businesses, something which the signatories have also asked Sunak to consider.
The chancellor will also unveil a series of policies designed to show “the benefits of Brexit”, according to the Sunday Times. The Budget will form part of six days of announcements on Britain’s post-Covid crisis future.
Further reading on Budget 2021 and small business
What coronavirus business support is available from the government?
Budget 2021 and what it means for small business