Association of Taxation Technicians welcomes shelving of ‘impossible’ online sales tax

The idea of an online sales tax was first raised at Autumn Budget 2021 as a means of ‘levelling the playing field’ between online and more traditional physical retailers such as high street shops.¹ But the ATT expressed doubts as to whether an online sales tax was the best way to achieve this – and warned that the likely complexity would prove a headache for businesses and HMRC for years to come.²

In today’s Autumn Statement the Chancellor confirmed that the plan would not go ahead in response to concerns raised about complexity and the risk of creating unintended distortion or unfair outcomes between different business models.

Senga Prior, Chair of ATT’s Technical Steering Group, said:

“We are pleased to see that the Government is shelving its plans for an online sales tax and will instead search for alternatives to address issues with the current business rates rules.

“It would have been impossible to make the online sales tax a simple tax. There were several issues which would have needed addressing, in particular those around scope and boundary.  For example, would ‘click and collect’ orders be subject to the tax or exempt? What about overseas sellers and small-scale entrepreneurs who sell on internet marketplaces such as eBay? The idea of addressing issues regarding an existing tax, in this case business rates, by introducing an entirely new and potentially very complex tax was puzzling.

“It is sensible to drop what would have been an overly complex solution to an issue which arguably just reflects changes in customer preferences and technological developments.”