The government is today (11 July 2019) publishing draft legislation for the next Finance Bill to deliver on our Budget 2018 commitment to a competitive and fair tax system, including updating tax policies for the digital age by ensuring large digital companies pay their fair share through a world-leading Digital Services Tax.
This Finance Bill, published in draft form today, ensures that from April next year:
- large digital businesses pay a new Digital Services Tax that reflects the value derived from their UK users
- off-payroll working rules will ensure that two people working side by side in a similar role for the same employer pay the same employment taxes
- when a business becomes insolvent, more of the taxes paid in good faith by its employees and customers will go to fund public services as intended, rather than being distributed to other creditors such as financial institutions
Jesse Norman, Financial Secretary to the Treasury and Paymaster General, said:
The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate Digital Services Tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement.
The consultations on the draft legislation will run until 5 September, with measures included in the next Finance Bill. Respondents can contribute here.
The government has always said that the best solution to the taxation of digital companies is reform of international tax rules, and we continue to work through the OECD and G20 to seek a globally agreed solution. Once that is achieved we will no longer need our own Digital Services Tax. Discussions will continue at next week’s G7 Finance Ministers.
Announced by the government at Budget 2018, the Digital Services Tax is a targeted, proportionate, and temporary tax that will ensure large digital businesses pay tax that reflects the value derived from their UK users. It will not apply to small businesses or businesses making UK losses – helping to protect start-ups.
The government will legislate for the Digital Services Tax in the next Finance Bill 2019-20 so that it applies from April 2020.
Earlier publication of Finance Bill legislation – as part of the government’s single fiscal event process – allows more time for scrutiny of tax measures, giving greater certainty and stability to taxpayers.