DST12100 - Digital Services Tax – Structure of the Legislation

This section explains the overall structure of the DST legislation and the steps that should be followed to determine whether a group is required to register and self-assess its DST liability.

Does a group provide digital services activities?

A group will only be liable to DST if it generates revenues from digital services activities. The first stage is consequently to identify whether the group provides online services which meet the definition of one or more of the three digital services activities.

Determining the revenues from a group’s digital services activities

Once a group has identified its digital services activities, the next stage is to determine the revenues from these services.

These will include all revenues where there is a connection between the earning of the revenue and the digital services activity. This will also include revenues which are connected to the digital services activity and to another activity. However, where only part of the revenue is connected to the digital services activity and another part of the revenue has no connection to the digital services activity, these revenues should be attributed to the digital services activity on a just and reasonable basis.

In exceptional circumstances, a group could be chargeable to DST even if it no longer provides the digital services activity in the relevant accounting period. The provision of the digital services activity in the period is not a condition in the legislation. Instead the legislation is designed to identify taxable revenues. Consequently, if a group generates digital services revenues exceeding the threshold conditions then it will be subject to DST, regardless of whether it provides the activity in the relevant period.

Determining how much of these revenues are attributable to UK users

DST is charged on the revenues from the digital services activity which are attributable to UK users or UK digital services revenues.

Are the threshold conditions met?

Once a group has calculated its digital services revenues and UK digital services revenues, these will need to be compared against the revenue thresholds. Only if the thresholds conditions are met then the group will be required to register for DST and submit its self-assessment.

Calculating the DST charge

If the threshold conditions are met, then the group’s DST liability will be 2% of its UK Digital Services revenues after deducting the allowance. Alternatively, the group can elect to calculate its liability under the alternative charge calculation.