Chancellor of the Exchequer John Healey is set to unveil a £1bn tax crackdown on online marketplaces such as Amazon and Temu, with the proceeds set to fund tax relief for high street retailers.
At this month's Budget, the Chancellor is expected to make e-commerce platforms including Amazon, eBay and Temu liable for collecting tax owed by third-party sellers operating on their sites, according to a report by the Times.
Funding for business rates cuts
The Treasury is anticipated to channel revenues generated by this measure towards business rates reductions for high street shops — a commitment long championed by Andy Burnham.
This trade-off is likely to be met with approval by retail chiefs, who have been piling pressure on the Government to address the industry's mounting tax burden, with business rates and employment costs cited amongst their most pressing concerns.
VAT collection at source
The Chancellor is poised to make online marketplaces responsible for collecting VAT at source from each seller whose annual turnover exceeds £90,000, as reported by City AM.
The clampdown is designed to tackle growing concerns that overseas retailers are establishing UK shell companies in order to sidestep VAT obligations.
Healey is expected to face calls to lower this threshold. Dan Neidle, founder of Tax Policy Associates, told the Times that the loophole will continue to be exploited unless the Treasury takes a firmer stance.
"This is a step in the right direction but the Treasury needs to go further and make online marketplaces responsible for collecting every penny of VAT on the sales made on their platform."
"Unless that happens these Chinese sham companies will find just another way around the rules."
Warehouse tax ruled out
During his campaign to become MP for Makerfield, the Prime Minister pledged to exempt 140,000 small high street retailers from business rates, giving them "the chance to thrive".
Burnham had floated the idea of increasing tax on "out of town" warehouses to fund this relief, but retail chiefs had been mounting fierce opposition to the proposal.
Industry leaders had cautioned that hiking warehouse tax would inevitably drive up costs for the retailers relying on them, ultimately leading to higher prices on the shelves for consumers.
John Lewis executive chairman Jason Tarry said last week that a warehouse tax would "reveal a fundamental misunderstanding of how modern high streets work".
The Chancellor is now reported to have ruled out a warehouse tax, and his move to target online sellers instead is likely to be warmly received by retail bosses, who have long argued that the high street bears a disproportionate tax burden compared to their e-commerce competitors.
Amazon told The Times that it backed the crackdown on online retailers, estimating it would generate around £700m for the Treasury – a figure lower than the government's own projections.
An Amazon spokesman said: "Closing this loophole will raise significant revenue for the exchequer and simplify compliance for both HMRC and legitimate sellers."
A spokesperson for the Treasury said: "As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events."
