Chancellor urged to create fair tax system for high street and online businesses

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Business leaders are calling on Chancellor Philip Hammond to tackle anomalies in the tax system that see high street shops pay higher rates on small premises than online giants do for vast warehouses.

The Institute of Directors (IoD) said the Chancellor should use next month's Budget to set up a New Economy Tax Commission to make the system fit for the modern age of internet shopping and the "platform economy".

With many small shops and pubs bracing themselves for sharp rises in their tax bills due to business rate revaluations this year, the IoD called for further relief for businesses based in properties worth up to £100,000.

In its Budget submission, the IoD also urged Mr Hammond to commit to matching US President Donald Trump if he slashes corporation taxes to 15%, as he has promised. At present, the Government is promising a cut to 17% by 2020.

And it called for:

:: An increase from £200,000 to £1 million in the cap on the Annual Investment Allowance, which offers tax relief on plant and machinery purchases.

:: The creation of a "white-list" of acceptable tax-planning schemes.

:: Consultation on simpler taxes for small businesses, with company owners paying a fixed rate, rather than differing rates of income tax, national insurance, corporation tax and dividend tax.

:: Consultation on liberalising complex investment schemes for start-ups.

IoD director general Stephen Martin said: "The Chancellor must take the chance at his final spring Budget to re-energise the UK business community, whose confidence has fluctuated since the vote to leave the European Union.

"In the short term, the Government must take action to relieve some of the pressure on the small businesses facing hikes in business rates and encourage companies to bring forward productivity-boosting investment.

"But we should also look to the future, launching a new Tax Commission to look at what the growth of self-employment and online business mean for the tax system. The goal must be a much more level playing field, which treats both high street and online businesses fairly and adapts to the growth of the 'platform economy', which is leading to an increase in flexible work."

The Treasury pointed out that the retail sector as a whole would see a 6% fall in its business rates bill - a saving of £400 million - following the revaluation, with a third of all businesses never having to pay rates again.

A spokesman said: "All taxes are kept under review and any changes are announced at fiscal events."