On 19 March 2020, the UK tax authorities published as part of a Finance Bill revised draft legislation for a digital services tax (DST) to begin from 1 April 2020. A series of explanatory notes and guidance materials have also been published up to and including 1 April.
The DST will apply at 2% of deemed UK revenues derived in excess of £25m per annum, where the group's total global revenues from in-scope activities exceed £500m per annum. In-scope activities are those that are derived in connection with providing users with search engine, online marketplace, or social media services, and includes revenues from associated advertising businesses. Thus UK revenues in scope are those linked to UK users but may not be derived from UK sources, and complex allocations may need to be performed by businesses conducting in-scope activities. A safe-harbour for loss making and low margin businesses exists and lowers the 2% rate where applicable.
The definitions included are likely to capture activities of businesses that do not consider themselves pure search engine, marketplace, or social media services. Two notable differences from the draft legislation published in July 2019 are a revised scope for the definition of a marketplace and the reference in each case to services rather than platforms.
