Regeneration or relief? Andy Burnham’s £210m high street package comes as retail and hospitality businesses face ‘punishing’ taxes

In late September, Andy Burnham announced a £210 million funding package designed to support the regeneration of high streets.

The plans aim to bring vacant and derelict buildings back into use by turning them into cafes, community spaces and local hubs.

However, new research has highlighted the significant amount of tax being paid by businesses in the retail and hospitality sectors.

This raises questions about whether regeneration alone will be enough to encourage businesses to invest in high street locations while operating costs remain high.

How much tax are retail and hospitality businesses paying?

Research carried out by the British Retail Consortium (BRC) and UK Hospitality (UKH) has revealed the scale of the tax burden currently facing the retail and hospitality sectors.

According to the study, hospitality businesses pay 82p in tax for every £1 of revenue they generate. Retail businesses pay 72p for every £1.

This gives both sectors the highest tax-to-revenue ratios of any UK industry. By comparison, banks pay around 40p in tax for every £1 of revenue.

The BRC and UKH have warned that these high levels of taxation could affect businesses and consumers in a few ways. This could include fewer employment opportunities, reduced business investment and higher prices.

For businesses operating on the high street, the additional financial pressure could also make investing in new premises or taking on empty units more difficult.

What impact can the tax burden have on businesses?

High levels of taxation can make it even harder for high street businesses to maintain healthy profit margins.

Retail and hospitality businesses already have a number of financial commitments to consider. These can include VAT, Business Rates, employer National Insurance contributions and Corporation Tax, as well as increasing costs such as wages, energy and other day-to-day expenses.

The more revenue that is used to cover tax and operating costs, the less money businesses have available to put back into their operations.

This could mean less funding for improvements to premises, recruitment, wage increases or plans to grow the business.

For smaller businesses, managing these costs can be particularly challenging. Unexpected increases in expenses can quickly affect cash flow and may result in businesses increasing their prices to cover the additional costs.

This makes understanding the tax position of a high street business an important consideration when deciding whether to invest in new premises or expand an existing operation.

How can an accountant help to support tax efficiency?

With tax making up a significant proportion of costs for many retail and hospitality businesses, professional accountancy support can help business owners take a closer look at their tax position and identify potential opportunities to improve efficiency.

An accountant can support businesses by:

• Making the most of tax reliefs and allowances: Reviewing the business’s finances to ensure it is claiming legitimate deductions, capital allowances and other reliefs where eligible.
• Reviewing the business structure: Considering whether being a sole trader, partnership or limited company continues to be the most appropriate option as the business changes and grows.
• Helping with VAT responsibilities: Making sure businesses understand their VAT obligations and are applying the appropriate VAT treatment to their products and services.
• Advising on future investments: Helping business owners understand the tax considerations involved in purchasing equipment, carrying out renovations or opening additional premises.
• Supporting cash flow planning: Helping businesses prepare for upcoming tax payments and reduce the risk of unexpected liabilities putting pressure on available working capital.
• Preparing for changes to the tax system: Keeping business owners aware of relevant tax changes so they have time to prepare for any new or increased liabilities.

For businesses operating on the high street, managing tax effectively can be an important part of maintaining profitability while dealing with rising costs.

Our team of accountants can help businesses understand their tax obligations while ensuring they make use of the reliefs and allowances available to them.

If you are running a hospitality or retail business and need support with tax efficiency, get in touch with our team.