By Ethan Wilkinson, owner of Great Gelato
Back in March 2020, when the first lockdown was ordered by the UK Government, we seriously considered dissolving my wife’s cake business. We couldn’t see how the small side hustle could possibly survive, given that in a matter of moments, all events were cancelled and all orders would have to be refunded.
However, we decided to take a big risk and change the direction of the business, swapping cakes for cookies, and festivals for online sales. It was a huge success and almost 10,000 sales and three lockdowns later, we decided to take the biggest risk yet and sign a contract for a retail unit on a beautiful high street in the historic market town of Stony Stratford, in the northwest corner of Milton Keynes.
When we signed for our lease at the beginning of this year, the energy price cap rise had not been announced, Russia hadn’t invaded Ukraine and inflation was not at record levels. Also, we trusted the chancellor that he would “deliver a low tax, higher growth economy.” It was looking like our gamble to scale up the business was going to pay off.
After a lot of personal financial investment (our savings!) and hard work to get the shop ready, on Easter weekend, we opened the first ice cream shop in Milton Keynes. Great Gelato sells authentic, handcrafted Italian gelato, alongside the cookies that got us going in the first place.
Our launch was a huge success, where we sold out every single day over the Easter weekend. We turned over thousands of pounds and welcomed hundreds of customers into our new shop. Despite the money coming in quicker than we could make gelato and cookies, we were surprised to see that nothing remained in our pocket. By the time we had set aside our hard-earned dough for staff, suppliers, rent, bills and the taxman, we had nothing left over. Not even a penny.
Telling ourselves that this happens to new businesses, and we’d start seeing our bank balance in the black shortly, we cut costs and saved money where we could, never compromising on the quality of our products, customer service or experience. But it’s not enough. Rising costs due to soaring inflation have squeezed the profit margin and the growing tax burden is crushing our ability to invest in our new business.
We are currently preparing our second quarterly VAT return. This quarter, the government has made almost three times the amount of money we have, just looking at VAT. Forget all the other taxes, levies and charges we are liable for. For all of our hard work, risk and personal investment, HMRC is lining its pockets from our grit, graft and gelato.
The one thing Nadhim Zahawi (or whoever is chancellor at the time of publication) could do right now to help both small businesses and their customers is to cut taxes. During the covid pandemic, the UK Government made the extraordinary decision to slash VAT for our sector. I would argue that the current circumstances and economic outlook are even more dire now, as we struggle to keep up with rising prices, tax rises and another energy cap price rise. The TaxPayers’ Alliance has already outlined the benefits to economic growth, weekly earnings and investment of a £56 billion package of tax cuts, including slashing VAT.
After three months of trading, we are already taking the incredibly difficult decision to lay off staff and cut hours. In our situation, this VAT money “owed” to HMRC could be used to save jobs and protect the business against future economic shocks. Cutting taxes would save jobs and grow the economy too. Zahawi shouldn’t wait a moment longer.