Government have announced a new 2% digital service tax (DST) for the taxation of multi-national corporations. This will be consulted on over the next few months.
In order to tackle the taxation of multi-national digital companies and groups the government will introduce a new DST from April 2020. The new 2% tax will be based on the revenues generated from the provision of business activities such as search engines, social media platforms and online market places and will apply to activities that are linked to UK users. The new tax will only apply to groups that have global revenues in excessive of £500 million per year. In addition, it is intended that a £25 million revenue allowance threshold will apply before the tax arises.
The government will consult on the design of the DST with the view that it will be legislated in Finance Bill 2019-20.
Government is committed to ensuring that companies pay the right amount of tax in relation to their UK operations. The Organisation for Economic Co-operation and Development (OECD) have yet to agree on an approach to the taxation of digital companies, so the UK is going it alone in the meantime until an appropriate long term solution is in place and agreed between OECD members.