The Entertainer and Boodles back 2% online sales levy

The Entertainer and Boodles are among retailers backing a proposed 2% levy on eligible UK online sales to fund business rates cuts of up to 37%, ahead of Chancellor John Healey’s 28 October Budget.

More than 200 business leaders have signed an open letter seeking the change, as reported by Retail Gazette. The campaign, led by the Real Rates Reform Alliance, calls for a lower tax on commercial property alongside a new contribution from online transactions.

What happened

F Hinds, Gieves & Hawkes and David Morris International have also supported the proposal. Signatories extend beyond retail to hospitality, leisure and property businesses, bringing together sectors with substantial interests in physical premises.

The alliance represents more than 28,000 businesses and business leaders. Its case is that the tax system places a disproportionate burden on businesses trading from stores, while failing to reflect the shift towards online commerce.

Under its plan, the levy would be collected through the existing VAT system. Exemptions would be designed to protect smaller businesses and certain types of spending, although the proposal described does not specify the thresholds or categories involved.

Research commissioned by Heart of London Business Alliance suggests the combined system could bring the property-based business rates multiplier down to 34.8p. The estimated reduction in bills ranges from 31% to 37%, depending on the property.

The alliance argues that the arrangement could preserve the overall tax revenue available to local government. Its proposed change is therefore about altering where that revenue comes from, rather than reducing the total amount raised.

The campaign adds to pre-Budget pressure from retailers over taxation, alongside calls from Marks & Spencer and John Lewis for tax relief.

The background

Changes introduced in April reduced business rates multipliers for qualifying retail, hospitality and leisure properties in England with rateable values below £500,000. Those reductions are partly financed by a higher multiplier on properties with rateable values of £500,000 or more.

That higher charge reaches both larger shops and distribution warehouses. The alliance’s objection is that moving the burden between categories of commercial property leaves the wider relationship between store-based trading and online sales unresolved.

Its founding members include the British Independent Retailers Association, UKHospitality and the Institute of Directors. UKHospitality is also pursuing licensing reform through its high street blueprint, a separate strand of its work on trading conditions.

An online sales levy has already been considered and rejected by government. Following a Treasury consultation in 2022, ministers decided against the approach because of concerns about higher consumer prices, additional administrative work and the treatment of retailers selling through both shops and websites.

Those concerns remain relevant to the scope of the latest proposal: it would not apply solely to ecommerce businesses such as Amazon. Retailers with physical premises and eligible online sales would also face the new charge.

For those multichannel businesses, the financial outcome would depend on the relationship between their property tax savings and the levy on their online transactions. A substantial rates reduction would not, by itself, establish that every participating retailer would be better off.

What people are saying

Ros Morgan, chair of the Real Rates Reform Alliance, argues that successive rounds of relief and exemptions have added complexity without resolving the system’s underlying weaknesses. She wants the government to use the Budget to make a structural change rather than redistribute costs between sectors again.

Michael Wainwright, managing director of Boodles, says the existing arrangements weigh unfairly on businesses that invest in shops and employ staff. He supports combining a lower property tax with an online transaction levy to give retailers more scope to spend on premises, employees and expansion.

Supporters maintain that sizeable reductions in property-based bills could offset the extra online sales charge. That argument rests on the proposed combination of taxes, rather than presenting the levy as a standalone measure with no additional cost to retailers.

What happens next

The alliance is pressing for action in the 28 October Budget. The levy remains a campaign proposal, not an announced tax change, and the account gives no implementation timetable or detailed rules for its proposed exemptions.

Healey is separately reported to be considering changes that would make online marketplaces responsible for collecting VAT from more third-party sellers. The marketplace VAT collection plan concerns enforcement of an existing tax obligation, rather than the creation of the alliance’s proposed sales levy.

That distinction matters for the Budget decision: changing who collects VAT would not itself introduce the new contribution towards business rates funding sought by the alliance. Although its levy would use VAT collection machinery, its purpose would be to finance a lower property-based charge.