Chancellor Philip Hammond has confirmed plans to give smaller retailers a 33 percent cut to business rates and introduced a new digital services tax for companies with at least £500m in global revenue.
The reduction in rates will take place over the next two years and is expected to save businesses £900m. This includes retail businesses with a rateable value of £51,000 or less. A Future High Streets Fund of £675m was also announced to help revive the high street, allowing local councils to invest in the improvements and redevelop of under-used retail and commercial areas into residential spaces.
Hammond also introduced a new digital services tax, which he said was not a tax on goods purchased online and would only be paid by businesses with a global revenue of £500m or more. This is likely to affect the likes of Amazon and Facebook and help the high street compete with strong online firms.
The chancellor announced there would be a new tax on the manufacture and import of plastic packaging that contains less than 30 percent recycled plastic, however, there are no plans to introduce a levy on disposable plastic cups. Hammond said: “I have concluded that a tax in isolation would not, at this point, deliver a decisive shift from disposable to reusable cups across all beverage types.”
Andy Mulcahy, director of strategy and insight, IMRG, said: “While small retail business-owners will undoubtedly welcome the chancellor’s announcement for a cut to business rates, we have to recognise that taxation measures such as these are essentially palliative; pressure on the high street has been building for many years but the core issues driving this shift have not been addressed quickly or comprehensively enough.
“Retail has undergone fundamental change over the past decade or so, with digital now playing an important role in many purchase decisions. Yet online is still portrayed as a negative in much coverage of the high street story – online is seen as being an inconvenience that is ‘killing’ high streets, with politicians from across the spectrum finding it politically-expedient to call repeatedly for ‘online taxes’. Again though, using taxation in this way can only be a palliative measure that is unlikely to bring people back to the high street in large numbers and restore the fortunes of physical retail.”
Roberto Lobue, partner and retail sector specialist at accountancy firm, Menzies LLP, added: “The chancellor has been toying with the idea of levelling the playing field for bricks and mortar retailers for some time. This latest pledge to do something about it will undoubtedly be welcome news for struggling businesses in the sector.
“The wave of retail insolvencies and company voluntary arrangements (CVAs) in 2018 indicates that many established businesses are now in survival mode – drastically reducing their property portfolios and cutting jobs, whilst adapting to consumer buying behaviour and increasing their share of online sales.”