Proposed UK Digital Services Tax: Why, Who, How, and What Next

In the Autumn Budget 2018, the UK Government announced that an interim digital services tax will take effect from April 2020, and issued a consultation setting out further details.

If enacted as proposed in the Consultation, the tax will be applied at 2% on revenues derived from social media platforms, search engines or online marketplaces. To fall within scope, the revenue must be linked to the participation of UK users.

The Consultation is now closed for responses, and the Government reaction is awaited. If the Government decides to move ahead and apply the DST from April 2020, the relevant legislation will be introduced in Finance Bill 2019/20.

This memorandum summarises the significance of the DST, the reasons it has been proposed, and the main concerns for businesses. A more detailed summary of the proposal is set out on the final page.