The UK’s warehouse sector has criticized a rise in the business fare tax targeted at online retailers such as Amazon, as the Chancellor has used the levy to ‘soften the blow’ for high street shops.
The government said the measure contained in Jeremy Hunt’s autumn statement on Thursday tackles the “bricks-for-click fiscal imbalance” by raising the large warehouse tariff bill by 27% and retailer tariffs by 20%.
Hunt also dropped plans for an online sales tax on e-commerce giants due to “complexity”, opting instead to raise rates on warehouses operated by companies such as Amazon, DHL and the John Lewis online store. He barred them from relief while doling out billions to limit the pain of high street retailers, pubs and restaurants.
Clare Bottle, chief executive of the United Kingdom Warehousing Association (UKWA), whose members include Amazon, Coca-Cola, Clipper Logistics and DHL, said the tax increase was “unfair”, “painful” and “disproportionate”. .
According to property adviser Altus Group, the valuation on which Amazon must pay prices for its warehouse in Tilbury, Essex, will rise from £7.1m to £12.3m, an increase of 74%. Supermarkets with food delivery businesses, such as Tesco and Sainsbury’s, are also likely to be affected.
“Warehouses are big buildings and they’re already paying their fair share,” Bottle said, accusing the government of “muddled thinking” and ignoring the low margins made by many warehouse companies.
The warehouse grab has given the government leeway to limit the rise in trade tariffs for many high street retailers, restaurants and pubs. Hunt announced a £1.6bn transitional relief package and £2.1bn relief package for hospitality businesses, extending emergency Covid-19 support.
Rate bills will fall immediately for businesses whose property values have fallen, rather than the previous gradual reduction, a move welcomed by sectors worried about how they will survive the expected recession in the UK.
Kate Nicholls, chief executive of UKHospitality, a lobby group representing hotels, pubs and restaurants, said she was delighted that businesses whose property valuations plummet “will immediately see the benefit on their bills, along with increases will be capped.”
Hunt also announced business tax changes for banks and insurers. Radical reforms to UK insurance rules – known as Solvency II – will reduce the amount of capital they have to set aside as safety buffers and allow them to invest money from life insurance policies and retirement in a wider and potentially riskier range of assets. .
The Association of British Insurers claimed the changes would free up around £100billion over 10 years, money the government hopes to channel into UK investments like infrastructure projects that help with their leveling scheme. However, the reforms do not stipulate that the money should be used to invest in UK projects. Critics, including Liberal Democrats, fear the funds will simply be invested overseas. This could lead to higher returns for insurers, but ultimately would not help Britain’s economic growth plans.
“If the money pledged for collapsing UK hospitals and decaying rail lines ends up flowing overseas, taxpayers will be rightly furious,” said Liberal Democrat Treasury spokeswoman Sarah Olney .
Mick McAteer, a former board member of the Financial Conduct Authority, said the changes would put policyholders at risk because insurers can invest in higher-risk assets and advance expected returns on their accounts, which could make them more profitable than they are now. are.
“This benefits shareholders at the expense of policyholders, who are exposed to the risk that these higher returns will not materialize over time,” McAteer said.
The Treasury also bowed to pressure from the city to cut the surtax on banks next year from 8% to 3%. Some lenders had worried about a windfall profits tax levied out of stealth, as they reaped the benefits of higher interest rates.
Richard Milnes, UK banking tax partner at accountant EY, said banks would be “particularly relieved” not to face further tax hikes. Banking lobby group UK Finance had warned the Chancellor that the sector would otherwise face “excessive” taxation compared to financial centers such as New York and Dublin.