(Image: Press Association Images)
eBay's UK boss has warned the Government must ensure small businesses are not “unfairly” hit by a planned tax crackdown on online marketplaces, amid reports of major changes coming in the Budget.
Chancellor John Healey is reportedly preparing to announce plans requiring online marketplaces to collect VAT on behalf of retailers selling through their platforms, potentially changing the rules for thousands of businesses using sites such as eBay.
Under the reported proposals, online platforms would have to collect VAT for all retailers with an annual turnover above £90,000, regardless of where they are based - closing a loophole which has reportedly seen some overseas sellers avoid VAT.
The changes are expected to raise up to £1billion and could help fund lower business rates for physical shops on Britain's high streets.
Currently, online marketplaces must collect VAT on sales made by overseas businesses to UK customers. However, some foreign firms have reportedly used shell companies to get around the rules.
Eve Williams, eBay UK's vice president and general manager, said it was vital that any changes ensured overseas sellers paid the tax they owed without putting domestic businesses at a disadvantage.
She told the Press Association news agency: “We strongly support that we ensure overseas sellers meet their legal and tax obligations, because I want to make sure our domestic sellers in the UK get the fairest chance to succeed as well, and that any of these tax changes that are coming in definitely protect small UK businesses.”
eBay warns tax thresholds could hold back growth
Ms Williams said eBay had been talking to the Treasury about how any new rules could support growth rather than create extra barriers for smaller firms.
She warned that strict financial thresholds could discourage entrepreneurs from expanding their businesses, pointing to VAT and National Insurance costs for employers.
“ Often, it is those really tight kinds of thresholds that inhibit people’s growth and so thresholds around things like VAT, around national insurance for employees, that are the things that actually stop growth.”
She continued: “And so what we’ve been talking to the Government about and the Chancellor is how do we make sure that everything we’re looking at, and any online sales taxes that might come in place and any new rules… are there things that could hinder small businesses and how do we make sure nothing that comes into place are things that could put people off?
“Because we want to make sure we’re just continuing to see growth.”
Ms Williams added: “The Chancellor’s got a big challenge ahead to make sure they are taxing the right things, to make sure they’ve got the investment in place.”
eBay says small businesses are being overlooked
The warning comes as eBay publishes a report highlighting what it describes as “persistent productivity gaps and stark regional imbalances” holding back the potential of small businesses.
Its research found that 31 of the 40 areas with the highest concentrations of small businesses trading on eBay had GDP per head below the national average.
Ms Williams said the findings showed online entrepreneurship was growing in places beyond the country's traditional economic hotspots.
She pointed to “hidden” high streets and businesses with the potential to expand if they had the confidence and resources to do so.
She said the Government could help unlock that potential by putting small-business growth at the heart of its economic strategy and raising awareness of the benefits of entrepreneurship.
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eBay boss calls for tax-free trading allowance to rise to £3,000
Ms Williams also called for the Government to increase the trading allowance from £1,000 to £3,000 a year, saying this would make it easier for people to try out business ideas and start earning money.
The allowance currently lets individuals earn up to £1,000 per tax year from self-employment and certain casual activities, such as babysitting or hiring out personal equipment, without paying tax on that income.
She also highlighted support for low-value imports into the European Union as a measure that could help small businesses grow.
Ahead of the Budget on October 28, eBay's report urged ministers and regional mayors to put small online businesses at the centre of local growth plans, with the aim of attracting investment and helping existing firms develop.
The reported VAT changes have not yet been confirmed as Government policy.