Consultation launched on Digital Services Tax

Louisa Cavell

The Government has launched a consultation on the proposed new Digital Services Tax (DST) due to come into force in April 2020.

The tax is designed as an interim response, pending global reform, to the challenges that digital businesses create for the international corporate tax rules. Submissions on the design, implementation and administration of the tax are welcomed ahead of its inclusion in the 2018-19 Finance Bill. The consultation runs until 28 February 2019. 

The consultation document contains the following key points:

  • DST is not a tax on online sales.
  • The DST is not intended to be a generalised tax on businesses that provide digital services, collect data or generate revenue from online advertising.
  • The DST will be a narrowly-targeted 2% tax on the UK revenues of digital businesses that are considered to derive significant value from the participation of their users
  • The tax will be applied by reference to specific digital business activities, which the Government considers derive significant value from users
  • The business activities within scope will be the provision of a social media platform, search engine or online marketplace
  • The tax will apply to the revenues generated by these taxable business activities, where those revenues are linked to the participation of a UK user base
  • A business will only become taxable if it:
  • generates more than £500 million in global annual revenues from inscope business activities
  • generates more than £25 million in annual revenues from in-scope business activities linked to the participation of UK users
  • Businesses will not have to pay tax on their first £25 million of UK taxable revenues
  • The tax will include a 'safe harbour’ which will allow businesses to elect to make an alternative calculation of their DST liability, and will be of value to those with very low profit margins
  • The tax will be deductible against UK Corporation Tax under existing principles, but it will not be creditable.

Read the full document here.

For further information please contact our Public Affairs Executive Amy Owens.

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