With the ongoing mantra of “Build back better”, this was inevitably a budget focussed on skills development and increased investment in infrastructure.
This was also touted as a “build back greener” Budget, on the eve of the COP26 summit, with a number of measures designed to incentivise businesses to meet net-zero targets.
Given the number of specific measures revealed in the Spring 2021 Budget intended to help the Consumer sector emerge from the strain of the Covid-19 pandemic, it is perhaps unsurprising there were few targeted announcements for retailers in this Autumn Budget refresh. Covid hard-hit sectors targeted for specific support include the Aviation industry and the Arts sector. However, the government announced further support for the haulage sector by continuing to freeze Vehicle Excise Duty for heavy goods vehicles (“HGV”) in 2022-23 and by suspending the HGV Road User Levy for another 12 months from August 2022. This is in addition to the measures it is currently taking to ease the shortage of HGV drivers. Continuing issues in the haulage sector have had severe consequences for many retailers.
The following measures can also be expected to have an impact on businesses operating in the Consumer sector:
The headline news for businesses in the retail, hospitality, and leisure sector is a 50% reduction in business rates (capped at £110,000) for 12 months.
In addition, business rates will be reviewed every three years instead of five, and the planned increase in the business rates multiplier will be frozen. From 2023, businesses will be able to make property improvements and be exempt from paying any extra rates for a 12 month period. These measures are in response to the Business Rates review and consultation, which is now concluded.
Online sales taxes
Significantly, no online sales tax was introduced, following the Business Rates review, but a consultation on its introduction is expected shortly. The hope for this measure if introduced is that it may offer some parity between the taxation of online retailers versus more traditional “bricks and mortar” retailers.
However, more on this can certainly be expected as a result of the OECD’s base erosion and profit shifting (“BEPS”) initiatives. With a political compromise reached earlier this month between the UK and other countries on unilateral transition measures that include digital services taxes, this topic is likely to be an ongoing and complex issue and one which will directly affect many in the Consumer sector.
Plastic Packaging Tax (“PPT”)
The Autumn 2021 Budget resulted in some technical changes in how the PPT, a new tax due to come into force from 1 April 2022, will be managed/administered.
PPT is aimed at UK businesses that create or import plastic packaging that does not comprise a minimum of 30 percent recycled plastic. Proposed as a flat rate of £200 per tonne of qualifying plastic packaging for those exceeding a 10-tonne threshold. PPT is likely to have a knock-on effect right down the supply chain, with retailers passing on additional costs to their direct customers.
With furlough schemes now ended, there were no new employment incentives in the Autumn Budget specifically for retailers. The increase in the national living wage to £9.50 from 1 April 2022, however, will clearly have a negative knock-on effect on wage costs for employers with high numbers of affected staff.
No new VAT measures were mentioned for retailers. As previously announced in March, the temporary VAT reduction of 5% for goods and services in the tourism and hospitality sector ended on 30 September 2021 and a 12.5% rate now applies for the six months ending 31 March 2022 before moving back up to the full rate.
A number of more general corporate tax changes were announced that may impact companies operating in the consumer sector. These include:
- Abolition of cross-border group relief from 27 October 2021, a relief made possible following the outcome of the well-known 2010 Marks & Spencer case;
- R&D tax relief reform to support modern research methods by expanding qualifying expenditure to include data and cloud computing costs and a refocusing of support towards innovation undertaken in the UK. Retailers typically benefit from R&D relief on qualifying projects involving IT systems development or logistics operations. For many claimants in this sector, the use of cloud environments and data streams are an integral part of their development activity. As such, an update to this area has been long overdue and should be of benefit.
- A UK government consultation on how to make it easier for companies to re-domicile to the UK, to strengthen the UK’s position as a global business hub. Some territories (including Canada and Luxembourg) already allow companies to move their domicile and the aim of the UK consultation is to refine the UK rules to encourage increased investment and jobs into the UK, particularly in a post-Brexit world. The closing date for responses is 7 January 2022.
- For consumer groups operating in the cultural and arts sector, temporary increases to the rates of relief for museums, galleries, theatres, and orchestras will be welcoming news, together with a two-year extension of the relief for museums and galleries.
With all these measures, the devil is always in the detail so please get in touch if you would like help in maximising the tax opportunities presented by this budget.