eBay UK's vice president has said the Chancellor must ensure small UK businesses are not “unfairly” penalised if reforms to how tax is collected on online marketplaces go ahead. Eve Williams, vice president and general manager at eBay UK, said it was crucial to guarantee that any tax change would “definitely” protect small UK businesses.
Proposed VAT Collection Reforms
The Chancellor is reportedly set to announce plans making online marketplaces responsible for collecting VAT owed by all retailers selling on their platforms as part of the upcoming Budget. Online marketplaces already collect VAT on sales made by overseas businesses to UK customers, but some foreign firms have been said to use shell companies to bypass the rule.
Under the widely reported proposals, 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 and help reduce business rates for physical stores on the UK's high streets.
Protecting Small Business Growth
Ms Williams 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 said eBay had held discussions with the Treasury on how to protect growth and ensure small businesses were not unfairly affected by any tax crackdown. Ms Williams added: "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 noted the Chancellor faces a big challenge to ensure the Government is taxing the right things to secure the investment in place.
Regional Imbalances and Trading Allowance
A report published by eBay highlighted how the potential of small businesses was held back by "persistent productivity gaps and stark regional imbalances". The research found 31 of the 40 areas with the highest concentrations of eBay small business activity in the UK had a Gross Domestic Product (GDP) per head below the national average.
Ms Williams said this showed online entrepreneurship was developing beyond the expected economic hotspots, with "hidden" high streets and businesses that could grow further if they had the confidence and resources. She suggested increasing the trading allowance and supporting low-value imports into the European Union could help support small businesses' growth.
The trading allowance is a UK tax exemption allowing individuals to earn up to £1,000 per tax year from self-employment, casual services such as baby-sitting or hiring out personal equipment tax-free. 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".
Ahead of the Budget on October 28, the report called on ministers and regional mayors to put small online businesses at the centre of local growth plans, to attract new investment and help existing small enterprises develop.
