Digital Services Tax

The measure

It has been confirmed that the UK’s digital services tax (DST) will be implemented and will apply from 1 April 2020. The tax will be charged at a rate of 2% on gross revenues from in-scope activities provided to UK users. 


Who will be affected?

Large multi-national groups with revenue derived from the provision of a social media service, a search engine or an online marketplace where revenues exceed global and domestic thresholds.


When will the measure come into effect?

Digital services tax will apply from 1 April 2020.

Our view

DST was previously announced in Budget 2018 with draft legislation published in July 2019. A policy paper published today by HMRC indicates that there has been a clarification to the definition of a “UK user” relevant for on-line market places supplying accommodation. When the transaction involves accommodation, land or buildings not in the UK, revenue from that transaction will only be treated as derived from UK users if the consumer of the relevant service is a UK user.

Consideration is still being given as to whether the measure will apply to marketplace delivery fees.

The Government has also reiterated its commitment to developing an internationally agreed solution, via the OECD Inclusive Framework and G20, to the tax challenges presented by the digitalised economy and has reconfirmed that it will repeal DST once an appropriate global solution is in place.