UK retailers lost £414m to tax complexities in 2021

UK retail businesses lost £414 million last year because of cross-border tax complexities, according to research.

A study from the Centre for Economics and Business Research (Cebr), commissioned by Avalara, a US-based tax compliance technology company, found that the stresses of navigating complex regulations post-Brexit continues to hold back growth for UK retailers, and is causing anxiety for business leaders.

The research found that UK retailers remain optimistic for future European growth opportunities, with two thirds (66 per cent) of respondents stating they have plans to expand to at least one more EU market.

However, the weight of compliance burdens and the realities of sweeping EU tax reforms on sales from outside the bloc appear to be impacting these plans.

Nearly a fifth (19 per cent) of retailers currently exporting to the EU are planning to exit at least one EU market in the future, and 59 per cent revealed that the fear of being fined for tax compliance has recently caused them to reverse plans to sell goods in a European country.

In addition, the research predicts that the investment loss due to tax administration complexity is expected to result in a further £92 million of value lost to UK retailers by 2026.

New regulations and the increased amount of work to stay compliant is causing significant stress for retailers.

Nearly 7 in 10 retailers (69 per cent), said that ensuring they remain compliant with tax obligations and regulations is the most stressful thing about running their business.

Other anxieties weighing on leaders’ minds include fear of legal consequences (44 per cent), fear of losing time needed for other tasks (44 per cent), fear of complex terms and conditions (38 per cent), and fear of fines (31 per cent).

Commenting on the findings, Nina Skero, chief executive at Cebr, said: “Our analysis shows that, if the EU was part of the domestic market, exporters were set to make just over £252 billion £300 billion in revenue, instead of the £300 billion they actually earned.

“In addition to these missed sales to the EU, the export activity which does take place comes with a higher administrative burden which led to an additional loss of £386 million in gross value added (GVA) last year.”

Alex Baulf, senior director of global indirect tax at Avalara, said: “From the toll of Brexit-based regulation changes, to the uncertainty of the pandemic — anxiety levels have been skyrocketing in the retail sector as tax complexity has become a major red tape headache during this critical time for retail recovery.

“The compliance burdens on UK retailers are becoming almost unmanageable, and the fear of falling foul of compliance standards is hampering growth opportunities for British exporters. Retail businesses need greater support from regulators to help them navigate these changes, and must invest in digitisation to take more of the administrative and compliance burden away.”

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