Retail sector – Tax help in times of trouble

During the current pandemic the Government has announced many measures to help the retail sector. Here are the essential financial measures you can access.

Unprecedented measures for unprecedented times

The UK Government has announced a series of measures to help business generally, and specifically those operating in the Retail sector, during this turbulent period of global disruption.  The measures of most relevance to the Retail sector are:

  1. 12 months’ business rates holiday for the tax year 2020/2021 for all businesses in the Retail and Hospitality & Leisure sectors;
  2. VAT payment deferral until end of June 2020;
  3. Time to Pay arrangements for all taxes can be agreed with HMRC (Corporate tax, PAYE, NI, VAT etc.); and
  4. Coronavirus Job Retention Scheme (CJRS), to be administered by HMRC, will pay up to 80% of employees’ salaries who might otherwise be made redundant, up to £2,500 a month. 

The Detail

The business rates holiday is a specific measure to help the Retail sector.  Detailed guidance is available here and it will apply to properties that are wholly or mainly being used:

• as shops, restaurants, cafes, drinking establishments, cinemas and live music venues:
• for assembly and leisure; or
• as hotels, guest & boarding premises and self-catering accommodation.

Cash is king

Managing cash flow is vital to the survival of any business and the above measures are designed to help with this.  There are other options, which may be available to Retailers to improve cash flow through tax management, such as:

  • lowering your quarterly instalment payments to reflect revised profit forecasts in a global downturn.  
  • maximising capital allowance claims, for example, many retailers will have incurred substantial store fit-out costs in recent years, on which they should maximise capital allowances to reduce tax liabilities or to increase loss carry forward amounts for future years; and 
  • maximising R&D claims.  The definition of R&D for the purposes of obtaining tax credits is really very broad and may apply to any technological advance that is designed to make a product better, such as making a production process more efficient, making a product more environmentally friendly or adapting it to meet new regulatory requirements.   

Adapting to our environment

Those retailers who adapt the quickest to an ever-changing environment will clearly fare the best.

We are seeing some great examples of this in the media. Automotive companies are being asked to produce ventilators, whiskey distillers and perfume retailers are changing production lines to manufacture hand sanitiser and many retailers forced to close their high street stores are moving to online distance selling where they are able.

Whilst governments globally are offering solutions to support the business community and the wider economy during this period, domestic tax legislation and OECD principles continue to apply and key areas where further consideration may be required are:

  • Major change in the nature or conduct of the trade within a 5 year window of a change in ownership may lead to tax losses being placed in jeopardy, particularly where a business moves to a different kind of operation, supplier or customer base for any length of time.
  • Residency and permanent establishment issues, if a company is now being managed and controlled from a different jurisdiction to its country of incorporation.
  • Transfer pricing considerations, where for example services are being carried out from different locations, supply chains are disrupted and margins are different.

Get in touch

If any of these areas are likely to impact you and you would like further guidance, we would be very happy to discuss your specific circumstances with you. Please complete the form below and one of our advisors will be in touch within the working day.

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