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The new digital services tax begs two big questions

digital tax

Laurence Parry, tax partner at Kreston Reeves, on why the new digital services tax begs to very important questions. 

The Chancellor Philip Hammond announced in his Budget at the end of October the introduction of a new digital services tax.  The tax, which will be shaped further in a consultation, will apply to search engines, social media platforms, and online marketplaces and will be levied at 2% of the turnover from those businesses that relate to UK users.

The government gives the following examples of businesses that will fall into this new tax:

  • If a social media platform generates revenues from targeting adverts at UK users, the Government will apply a 2% tax to those revenues;
  • If a marketplace generates commission by facilitating a transaction between UK users, the Government will apply a 2% tax to those revenues;
  • If a search engine generates revenues from displaying advertising against the result of key search terms inputted by UK users, the Government will apply a 2% tax to those revenues.

This begs the first question – how will the legislation define this? ...

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