Digital services tax on large digital firms

Oct 30, 2018

As part of Budget 2018, Chancellor of the Exchequer, Philip Hammond announced his intention to introduce a 2 percent tax on the revenues of large social media platforms, search engines and online marketplaces linked to UK users.  The tax will take effect from April 2020. 

Noting that the tax rules for digital platform businesses have not kept pace with changing business models and that international attempts to tackle the issue were “painfully slow”, a UK Digital Services Tax will apply until a global solution is agreed, according to the Chancellor.  The UK Digital Services Tax will apply to profitable companies which generate at least £500m a year in global revenues from the operations targeted by the tax.  The tax will come into effect in April 2020 and is expected to raise over £400m a year.

The Chancellor stated that the Government will consult on the detail of the tax before its implementation and will continue to work at the OECD and G20 to seek a globally agreed solution.

The EU is also considering the introduction of an interim digital tax.  However a number of Member States, including Ireland, wish to hold off until the OECD deliver’s its recommendations on how this issue can be dealt with.