Working in union with HM Revenue & Customs, the UK Treasury has published its initial ‘draft legislation’ on the ‘Digital Services Tax’ which will establish the foundations for taxing large-scale digital enterprises, a key mandate of the UK government’s Finance Bill 2019/2020.
Presenting the government’s Budget 2018 statement last October, UK Chancellor Phillip Hammond announced that the UK would be the first nation to introduce a ‘Digital Services Tax’, ‘tackling head-on’ the complex matter of taxing tech conglomerates operating within multiple jurisdictions.
In the Budget statement, Hammond outlined that the UK will not wait on ‘painfully slow discussions’ taking place at an international level, with regards to taxing tech giants such as Amazon, Facebook, Google and Apple.
Publishing its ‘draft plans’, the Treasury has detailed a number of recommendations which will revamp the UK’s corporate tax code for the ‘digital age’, seeking to deliver a fair tax system for all business stakeholders.
The Treasury announces three key guiding digital tax directives that it will seek to install through the government’s Finance Bill 2019/2020, inbound from April of next year: –
- The Digital Services Tax will reflect the value ‘derided from UK users’ by large scale digital enterprises.
- The Treasury will streamline ‘payroll rules’ related to digital operations, ensuring that digital employers implement standard employee taxes across the board.
- Increasing the contribution of digital taxes towards ‘funding public services as intended to be’, rather than distributed to creditors or other financial institutions/
“The Digital Services Tax is a targeted, proportionate, and temporary tax that will ensure large digital businesses pay tax that reflects the value derived from their UK users. It will not apply to small businesses or businesses making UK losses – helping to protect start-ups” – The Treasury details in its statement
The new corporate tax is set to apply from April 2020 targeting tech/digital enterprises with global revenues of more than £500 million and supporting UK revenues of more than £25 million.
Jesse Norman, Financial Secretary to the Treasury and Paymaster General, said:
The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate Digital Services Tax is designed to keep our tax system in this area both fair and competitive, pending a longer-term international settlement.
