UK warehouse operators slam corporate tax hike | retail industry

The UK’s warehousing sector has criticized a corporate tax hike targeting online retailers like Amazon, as the Chancellor used the levy to ‘soften’ the hit on high street shops.

The government said the measure in Jeremy Hunt’s autumn statement on Thursday aimed to address the “government balance between bricks and clicks” by increasing fees for large warehouse operators by 27% and fees for retailers by 20%.

Hunt also scrapped plans for an online sales tax for e-commerce giants because of “complexity,” opting instead to hike prices at warehouses operated by companies like Amazon, DHL and John Lewis’ online store. He barred them from relief and handed out billions to limit the pain for high street retailers, pubs and restaurants.

Clare Bottle, chief executive of the United Kingdom Warehousing Association (UKWA), whose membership includes Amazon, Coca-Cola, Clipper Logistics and DHL, said the tax increase was “unfair”, “painful” and “disproportionate”.

According to property adviser Altus Group, the valuation, for which Amazon will have to pay interest on its warehouse in Tilbury, Essex, will rise from £7.1m to £12.3m, a rise of 74%. Grocery delivery supermarkets 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 “thinking in a jumble” and ignoring the low margins many warehouse companies earn.

The pull out of the warehouses gave the government leeway to limit the rise in business rates for many high street retailers, restaurants and pubs. Hunt announced a $1.6 billion transitional aid program

Interest bills will fall immediately for companies whose property values ​​have fallen, rather than being gradually reduced as before, a move welcomed by sectors worried about how they will survive the UK’s expected recession.

Kate Nicholls, chief executive of UKHospitality, a lobby group representing hotels, pubs and restaurants, said she was pleased that companies whose property valuations fall “will see the benefit in their bills immediately, while at the same time increases are contained”.

Hunt also announced corporate tax changes for banks and insurance companies. Sweeping reforms to UK insurance rules – known as Solvency II – will reduce the amount of capital they need to set aside as a safety buffer and allow them to invest money from life insurance and pension policies in a broader and potentially riskier range of assets.

The Association of British Insurers claimed the changes will cost around £100bn over 10 years. However, the reforms do not require the money to be used to invest in UK projects. Critics, including the Liberal Democrats, fear that funds will simply be invested abroad. This could result in higher returns for insurers but ultimately does not contribute to UK economic growth plans.

“When promised money flows abroad for crumbling British hospitals and ailing railway lines, taxpayers will rightly be 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 as insurers could invest in riskier assets and bring forward the expected returns on their accounts, which could make them appear more profitable than they currently are.

“This benefits shareholders at the expense of policyholders, who face the risk that these higher returns will not materialize over time,” McAteer said.

The Treasury Department also bowed to pressure from the city to lower the bank mark-up from 8% to 3% next year. Some lenders had worried about a perceived windfall tax as they took advantage of higher interest rates.

Richard Milnes, tax partner for UK banks at accounting firm EY, said banks are “particularly relieved” that they will not face further tax hikes. The banking lobby UK Finance had warned the Chancellor that otherwise the industry would have to reckon with “excessive” taxes compared to financial centers such as New York and Dublin.

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