Government to introduce 2% digital services tax in 2020

digital service tax

Autumn Budget 2018: From April 2020, the government will introduce a new 2% digital services tax on large organisations, Chancellor Philip Hammond has announced in his 2018 budget.

The tax will apply to revenues generated from search engines, social media platforms and online marketplaces where activities are linked to the participation of UK users, subject to a £25 million per annum allowance.

The tax will only be applied to organisations that generate global revenues from in-scope business activities in excess of £500 million per annum and will include a safe harbour provision that exempts loss-makers and reduces the effective rate of tax on organisations with low profit margins.

Hammond stated: “It is only right that global giants with [sources of profit] in the UK pay their fair share towards supporting our vital public services.”

David Jinks, head of consumer research at ParcelHero, said: “Providing the tax really will only be paid by profitable international firms that have at least £500m a year in global revenues, and is not changed into a stealth online sales tax in the future, it is to be welcomed.

“We have often said we do not believe an all-out online sales tax would help the high street, but instead harm those retailers [that] have embraced the future and adopted a multi-channel high street and e-commerce approach. Don’t forget the likes of John Lewis’ appeal to store visitors and online buyers alike. The Chancellor must promise that the new digital services tax will not morph into an online sales tax in the future.”