Some businesses will be subject to a new tax from April 2020.
In recent years, many countries have proposed the introduction of a digital services tax (DST). Not many have made it into law in Europe, except for France, which has already passed its own DST last summer.
But the UK also has a proposed DST that is planning to go ahead this year.
From April 2020, a new 2% tax will be introduced by the government on the revenues of social media platforms, search engines and online marketplaces as well as associated online advertising business. It will apply if a business has a global revenue derived from digital services greater than £500m worldwide and £25m in the UK.
The tax is said by the government to be closing a loophole whereby international corporations generating high revenue make a fair contribution to public finances. The DST will be addressing a “misalignment” between where digital services make their profits and where the profits are taxed.
The tax is projected to generate £440m a year to the treasury by the end of 2023.
Who will it affect?
Businesses likely to be subject to the tax are any retailers that use online platforms to market and sell their products. Online retailers need to assess and take advice on whether the tax will apply to their business.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.