SME retailers need some well-considered incentives to boost confidence and alleviate cost pressures.
In the current climate of Brexit uncertainty and currency fluctuations, UK-based retailers need some well-considered incentives to alleviate current cost pressures and encourage long-term planning, say tax specialists at accountancy firm Menzies LLP.
Just one year ago, retailers were hiring at their fastest rate for a decade and there was healthy growth in the sector. Auto enrolment and the National Living Wage have brought some challenges but these should have been manageable were it not for the outcome of the EU referendum in June, which has created considerable uncertainty. The Chancellor must address this in a practical and direct way.
1 – Tax relief for investment in mobile tech and e-commerce
Increasing use of mobile technology and e-commerce is forcing retailers to move towards an increasingly 24/7, worldwide offering.
To help retailers to resource investment in this area, the Chancellor should consider introducing a mobile technology tax credit, or similar incentive.
2 – Reduction in import duty
With the value of the pound against all major currencies at its lowest level for a number of years, the Chancellor should consider extending some assistance to retailers that import goods from around the world.
Already operating with low margins, many retailers are unable to absorb Forex-related cost increases and passing them on to the customer is not viable and would impact on competitiveness. To take the pressure off the sector, the Chancellor should consider reducing import duty or providing an import credit for retailers. This would benefit both the retailer and the consumer; as prices would remain affordable.
3 – Reduction in VAT
To boost consumer spending, the Chancellor might consider greasing the economy by cutting VAT for a temporary period, perhaps back to 17.5%.
This could be beneficial in the short-term but could have an inflationary effect, encourage imports and increase the balance of payments deficit. This could be counterproductive in the longer term.
4 – Increase National Insurance (NI) Allowances
The retail sector has already been impacted by the National Living Wage, especially since the Brexit vote and the Apprenticeship Levy is set to bring more cost for some from next year. To alleviate these employment-related cost pressures, the Chancellor should consider increasing employers’ NI allowances.
5 – Business Rates
The move to permanently extend the business rates relief scheme was well received by retailers when it was announced in March this year. The Chancellor could go one step further and opt to bring forward, from 2020, the planned change to link business rates with the Consumer Price Index (CPI), rather than the current, higher Retail Price Index (RPI).
Business rates are changing for the better but there is still room for improvement and bringing forward the planned changes to the way business rates are calculated would provide a confidence boost to the sector.
6 – Clarity on anti-avoidance
Now that the 2016 Finance Bill has been enacted, overseas online retailers will no longer be able to benefit from VAT loopholes when selling in the UK. While this will help to level the playing field for UK-based e-tailers, greater clarity about how these laws will be enforced will provide added comfort to online entrepreneurs.
Get more input on the 2016 Autumn Statement implications for the Retail & wholesale sector by speaking to our sector team.