Policy paper

Digital Services Tax - Taxes (Interest Rate) (Amendment No. 2) Regulations 2020

Published 16 September 2020

Who is likely to be affected

Large multi-national enterprises with revenue derived from the provision of a social media service, a search engine or an online marketplace to UK users.

General description of the measure

This Statutory Instrument will set the interest rates for over and under payments of Digital Services Tax liabilities.

Policy objective

This instrument sets interest rates on over- and under-paid Digital Services Tax liabilities from taxpayers. Ensuring interest is paid on these amounts at the right rate encourages compliance with making payments on time, by ensuring equity exists between on time payments and early and late payments.

Background to the measure

Digital Services Tax is a new tax on the revenues of search engines, social media services and online marketplaces which derive value from users in the UK. It is a standalone tax with its own new administrative framework. Read more about the introduction of Digital Services Tax.

A consequential change from introducing this new tax is that new provisions are needed to ensure tax is paid in a timely manner. This instrument sets interest rates on over- and under-paid Digital Services Tax liabilities from taxpayers.

Detailed proposal

Operative date

This instrument will be laid before the House of Commons on 16 September 2020 and will come into force from 14 October 2020.

Current law

Part 2 of the Finance Act 2020 introduced the Digital Services Tax. This legislation included provisions relating to the charging of interest on late or under payments of Digital Services Tax liabilities or paying interest on overpayments.

Proposed revisions

This instrument will amend the Taxes (Interest Rate) Regulations 1989 (SI 1989/1297) to set the interest rates for these interest provisions. It sets out what rates will apply for Digital Services Tax.

The interest rate applicable to the payment of a Digital Services Tax liability paid before its required due date will be the reference rate less 0.25%, or 0.5% if greater.

The interest rate applicable to the repayment of a Digital Services Tax liability that is overpaid on or after its required due date will be the reference rate less 1%, or 0.5% if greater.

The interest rate applicable when there is an underpayment of the Digital Services Tax liability will be the reference rate plus 2.5%.

Summary of impacts

Exchequer impact (£m)

2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026
nil	nil	nil	nil	nil	nil

This measure is not expected to have an Exchequer impact. Further details on the Digital Services Tax can be found in the policy costings document published alongside Budget 2020 and 2018.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

There is no impact on individuals as this measure only affects businesses.

Equalities impacts

It is not anticipated that there will be impacts for those in groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have no impact on businesses or civil society organisations.

This measure is expected overall to have no impact on businesses experience of dealing with HMRC. This is an administrative process that customers will already be expecting from HMRC on Digital Services Tax liabilities.

The number of businesses we expect to be in scope for Digital Services Tax is small. Of this number, we expect those who over or under pay their Digital Services Tax liability, which would result in interest accruing, will be much lower. Therefore, our assessment it that a low number of businesses will be impacted by this measure.

We do not expect there to be any one-off costs or savings to businesses. Nor ongoing costs or savings. If a Digital Services Tax liability is over or under paid, the interest required will be calculated and administered by HMRC, not the businesses.

This measure is not expected to impact civil society organisations.

Operational impact (£m) (HMRC or other)

There are no financial consequences for HMRC.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from receipts.

Further advice

If you have any questions about this change, contact the Digital Services Tax mailbox: dst.mailbox@hmrc.gov.uk

Declaration

The Rt Hon Jesse Norman MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.