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UK Publishes Digital Services Tax Policy Paper

The UK’s revenue authority, HMRC, has published a policy paper concerning a digital services tax which will enter into force on 1 April 2020 in the UKThe tax will apply to businesses making available search engines, social media platforms or online marketplaces to UK users, including any associated online advertising of that business, with a global annual turnover over £500 million pounds and over £25 million pounds of turnover attributable to revenue derived from UK usersThe tax will apply at a rate of 2% to revenue over £25 million pounds.

The UK tax will include a safe harbour provision providing for an alternative calculation to ensure business sustainability is not jeopardised where businesses have very low profit margins. 

The policy paper notes that the UK government still believes the most sustainable long-term solution to the tax challenges arising from digitalisation is reform of the international corporate tax rules and strongly supports G7, G20 and OECD discussions on the different proposals for reform. The government is committed to dis-applying the Digital Services Tax once an appropriate international solution is in place.

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