In late September, Andy Burnham announced a £210 million investment aimed at regenerating high streets by transforming vacant and derelict buildings into cafes, community hubs and other useful spaces.
However, a recent study has highlighted the significant tax burden faced by businesses in the retail and hospitality sectors, raising questions about how effective the latest regeneration plans will be if businesses continue to face high operating costs.
Research from the British Retail Consortium (BRC) and UK Hospitality (UKH) found that hospitality businesses pay 82p in tax for every £1 of revenue they generate, while retail businesses pay 72p.
These figures represent the highest tax-to-revenue ratios across UK sectors, with banks paying around 40p for every £1.
The organisations have warned that such a substantial tax burden could have wider implications for both businesses and consumers.
Potential consequences include fewer jobs, lower levels of investment and increased prices.
For businesses operating on the high street, these financial pressures could also make it more difficult to invest in new premises or take on vacant units.
While regeneration projects could help bring more people back to high streets, businesses may still be hesitant to expand if the overall cost of operating remains high. This could create further challenges for sectors that are already under pressure.
For businesses based on the high street, a significant tax burden can place additional pressure on already-tight profit margins.
Retail and hospitality businesses typically face a range of costs, including VAT, Business Rates, employer National Insurance contributions and Corporation Tax, alongside other rising expenses such as wages, energy bills and general operating costs.
When more of a business’s revenue is taken up by tax and other expenses, there is less available to reinvest in the business, employ additional staff, increase wages or fund expansion.
Smaller businesses can be particularly vulnerable to these pressures. Unexpected increases in costs can be difficult to absorb, meaning businesses may have little choice but to pass some of these costs on to customers through higher prices.
For business owners, understanding the tax implications of operating from a high street premises is therefore an important part of determining whether an investment is financially viable.
Effective tax planning can help businesses identify reliefs they may be entitled to, manage their tax liabilities and maintain healthy cash flow.
With tax representing a significant cost for many businesses in the retail and hospitality sectors, working with an accountant can help business owners better understand their tax position and identify ways to improve tax efficiency.
An accountant can help businesses:
For high street businesses dealing with increasing operating costs, effective tax planning can play an important role in protecting profitability.
Our team of accountants can help businesses understand what tax they are required to pay while making sure they take advantage of the reliefs and allowances available to them.
For tax support in the retail and hospitality sector, get in touch with our team!
