By Sue Leathem
Partner
JR Watson & Co
PRESENT day Chancellors of the Exchequer have more to do than balancing the books. The Budget is not just a matter of tinkering at the edges, increases in allowances here and there, increasing fuel and beer tax and so on. Nowadays the Chancellor needs to address public concerns and make clear statements as to what will happen in the foreseeable future.
Philip Hammond announced increased spending on the NHS and defence. More money will be allocated to Universal Credit which has previously been heavily criticised. Alongside this there are changes to income tax personal allowances and bands of tax which will benefit many people.
Concerns have been expressed that the Chancellor has announced a deficit budget because the sums do not add up. However, the UK economy is buoyant so the Treasury is collecting increased tax and national insurance.
The most interesting announcement concerned the introduction of a digital services tax on internet companies, to be introduced by 2020. There has been a lot of public interest in companies who have a global footprint, do a lot of business in the UK, but pay very little tax here. They are not doing anything wrong. Their arrangements simply reflect the fact that our tax law does not reflect modern trading. The rules have already been tightened to ensure that the right amount of VAT comes into the public purse. In 2020 there will be a turnover-based tax charged on advertising revenue.
People question why these companies do business in the UK without paying tax. It is not only the internet companies, there are many with a high street presence who use our tax law to move profit legitimately to lower tax countries. It is perhaps sensible for the Exchequer to look at this problem in a bite sized chunks rather than completely rewriting the legislation. But those businesses on the High Street using these rules might be feeling uncomfortable? And the online companies must worry about paying tax on the actual sales they make in the UK rather than just the advertising revenue.
We have all seen the loss of retailers on the High Streets. They are losing sales to online retailers and have higher property costs – rent and business rates. The Treasury can do nothing about rents, but a two-year discount on business rates for retailers will be effected in April 2019. This is a sensible start, but it can only be a start. These business communities need to focus on attracting new customers.
Sue Leathem is a Partner in J R Watson & Co and can be contacted on 01604 630745 or by email to