Internet giants face tax-hike

It has been confirmed that from April 2020, the government will introduce a new 2% Digital Services Tax (DST) on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.

This is an attempt to tax, in the UK, revenues earned by these social media platforms from customers resident in the UK. At present, significant profits are being earned in the UK but transferred off-shore thus avoiding UK taxation.

In the notes confirming that these changes would be included in the Finance Bill 2019, HMRC said:

The revenues from the business activity – subject to DST – will include any revenue earned by the group, which is connected to the business activity, irrespective of how the business monetises the platform. If revenues are attributable to the business activity and another activity, the business will need to apportion the revenue to each activity on a just and reasonable basis.

A UK user is a user that is normally located in the UK.

The Digital Services Tax will apply to businesses that provide a social media platform, search engine or an online marketplace to UK users. These businesses will be liable to Digital Services Tax when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.