eBay UK's vice-president and general manager, Eve Williams, has warned Andy Burnham's government that proposed changes to VAT collection could unfairly penalise small UK businesses. The warning follows reports that Chancellor John Healey will announce plans in the upcoming Budget to make online marketplaces responsible for collecting VAT owed by all retailers selling on their platforms.
The Budget is scheduled for Wednesday, October 28. Under the reported plans, online platforms would collect VAT for all retailers with an annual turnover above £90,000, regardless of where they are based. The move is expected to raise up to £1 billion, which could help reduce business rates for physical stores on UK high streets.
Concerns over thresholds and growth
Ms Williams told the Press Association that it is crucial to ensure any tax change 'definitely' protects small UK businesses. She said: "We strongly support that we ensure overseas sellers meet their legal and tax obligations, because I want to make sure our domestic sellers in the UK get the fairest chance to succeed as well, and that any of these tax changes that are coming in definitely protect small UK businesses."
She noted that eBay has held discussions with the Treasury on protecting growth and ensuring small businesses are not 'unfairly' affected by any tax crackdown. "Often, it is those really tight kinds of thresholds that inhibit people's growth and so thresholds around things like VAT, around national insurance for employees, that are the things that actually stop growth," she said.
eBay report highlights regional imbalances
eBay has also published a report showing that small business potential is held back by 'persistent productivity gaps and stark regional imbalances'. The report found that 31 of the 40 areas with the highest concentrations of eBay small business activity in the UK have a gross domestic product (GDP) per head below the national average. It also showed online entrepreneurship is developing beyond expected economic hotspots.
Ms Williams said 'hidden' high streets and businesses could grow further with the right confidence and resources. She called for small business growth to be at the heart of the Government's economic strategy.
Trading allowance increase proposed
Measures such as increasing the trading allowance and supporting low-value imports into the European Union could also help small businesses grow, Ms Williams said. Individuals can currently earn up to £1,000 per tax year from self-employment, casual services such as baby-sitting or hiring out personal equipment tax-free through the trading allowance.
Ms Williams said the allowance should be increased to £3,000 to 'make it easier for people to test their business ideas and start earning money'.
