Online Sales Tax UK Table of Contents
In July the government broke the news that a new 2% sales tax could be imposed on internet enterprises or as a possible new consumer distribution tax. The tax aims to raise around 2 billion a year, thereby contributing to a reduction in some costs of the COVID-19 effect. In conjunction with e-commerce websites such as Amazon, not only are dreams of leveling the economic playing field for highways. The existing digital sales tax (DST) will run along with the new tax.
The tax itself has not yet been verified, but it has left smaller digital enterprises questioning how to plan appropriately. We also asked Tom and Chris, from BDO's Indirect Tax team, how the tax could impact businesses, if applied, in their experience in dealing with similar taxes in other jurisdictions.
Currently, the government has not officially revealed the tax, with continued internal negotiations on the autumn budget in advance. There is also a possibility that certain businesses will not be caught by the tax even though it is enforced.
Once we have more details, there might be exemptions,' Tom says. suspecting a lot of fine information would be examined and maybe some company will have an impact.
Chris assumes that if anything happens, the tax will be some time in progress. Within months or even more than that, a lengthy policy process could be underway determining which firms are being impacted by the new legislation.
Having said that, it's worth looking at the improvement, because companies, who believe once it is revealed they're in the peak spot on the proposals, would not believe the final results are very different from what has been proposed.
Chris considers that the biggest impact will be on certain companies who do not have the resources required for the introduction of the new tax.
After adopting its pricing systems to suit the need, for example, most companies will know more about VAT in some way and function consequently. The big companies who know more about the cross-border ways of operating at various VAT rates and other charges have already developed online services. But, on a realistic level, smaller companies that are not multinational can find the brunt of that.'
Imposing a new, additional tax is likely to result in companies with no strategy for the coming years to upgrade their IT processes, payment processing, and price structure.
They might not be able to charge and pay for both the VAT factor and the extra internet sales tax,' says Chris, 'and this can be expensive. And this tax can also be examined by another country, if it is applied correctly they might start doing it also and it will require more adaptation.
Tom thinks Tech as a huge business would not get hugely affected, provided that the aim of the tax is for bricks and mortar shops and internet retailers to level their playing field. There's no highway matching part to contend against streaming platforms or app developers, he said, but the highway profits directly if the tax increases Amazon's cost, It would just have a real impact on retail technology companies and goods distribution.'
The timing of the new tax has not been decided, although it is expected to take some time to introduce because of its creativity and sophistication. You have the additional issue of the impact of COVID-19 on present-day economic growth, Chris says. It is possible that if COVID-19 makes internet shopping a requirement for everyone, the government would press ahead in an effort to increase the expense of the online economy.
Tom suggests that organizations would prefer, in addition to guidelines, to know whether the party involved would have fair terms. If a UK corporation is concerned, the authority will obviously go to its premises and make evaluations if necessary, Although if it is a company that is based abroad, then it can be very difficult to impose these fees.
All well-known online shopping sectors will like to ensure there will be agreement protocols when the tax is imposed and when there is guarantee companies could start leaving the country.
However, once the current regulations are enforced, the company would certainly not automatically leave the UK. Chris says: 'Even with the repercussions of events this year, Britain has a large economy which is very lucrative for retailers with the right proposal. I don't necessarily regard a proposed tax as an opportunity to enter or stay on the online market, especially given the broader economic environment provided by COVID-19.'
The taxes creating in the UK is expected to take place all over the world when they are experiencing the issue as them.
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