2018 Autumn Budget: Chancellor unveils Digital Services Tax

30 Oct 2018

In his 2018 Autumn Budget speech, Chancellor Philip Hammond unveiled a so-called ‘Digital Services Tax’, which will require certain digital businesses to pay tax on sales generated in the UK.

Over the past few years, a handful of large international companies have been subject to criticism for paying only small amounts of tax on their UK profits. The Chancellor previously stated that international agreements ‘need to be put into place’ to help tackle the issue; however, the Organisation for Economic Co-operation and Development (OECD), the body responsible for co-ordinating economic policy, has reportedly struggled to come to a decision on the matter.

The European Commission (EC) separately proposed an EU-wide 3% digital tax, but has so far failed to convince some EU member states.

The Digital Services Tax will take effect from April 2020, and will target ‘established technology giants’ with global revenues from in-scope business activities in excess of £500 million per annum, as opposed to tech start-ups.

Commenting on the tax in his Budget speech, Mr Hammond said: ‘It’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business.’