DST29000 - Allocating Case 4 and Case 5 Revenues Between UK Users and Non-UK Users

Some revenues in Cases 4 and 5 will arise in connection with both UK users and non-UK users. In these cases, the DST legislation requires groups to allocate the revenues to UK users on a just and reasonable basis. The method used should take account of the information about user location available to the business and any other relevant facts or circumstances.

Case 4

As explained in DST26000, revenues from facilitating or providing online advertising will be UK digital services revenues when the advertising is viewed (or otherwise consumed) by a UK user. There are likely to be cases where the advertising is shown to both UK users and non-UK users. For instance, a group may launch a pan-European advertising campaign where adverts, or similar adverts, are shown to users across Europe.

In some cases, it will be possible to determine the revenues that are directly attributable to showing advertising to UK users. For example, some advertising contracts will be priced on a revenue per click or revenue per impression basis. The group may consequently have the data to show the proportion of the revenues generated from a campaign which relate to UK users. Where it is possible to directly identify the revenues attributable to UK users, the group is required to do so.

However, there may be some circumstances where this is not possible. The group will need to apportion the total revenue (e.g. from that contract or campaign) between UK users and non-UK users on a just and reasonable basis. What is just and reasonable will depend on the specific facts and circumstances of the case. However, some factors which may be relevant to consider are:

  • The intended commercial outcome of the transaction
  • The contractual requirements
  • The relative volume of users in each jurisdiction
  • The revenue per user in each jurisdiction
  • The relative engagement of users in each jurisdiction
  • The size and maturity of the online service in each jurisdiction
  • The average profitability or revenue performance in each jurisdiction (or in comparable jurisdictions)

Sometimes factors will point in different directions. In these cases, the business must use its judgement to determine which factors give a just and reasonable reflection of the revenues the business has derived from showing advertising to UK users.

Example A

A group typically charges advertisers £100 to show adverts to 1,000 UK users and £50 to show the same advert to 1,000 users outside the UK. Business ABC wants to launch a global campaign. The group charges Business ABC £90 per 1,000 views.

The campaign results in 75,000 UK views and 25,000 non-UK views. The group receives £9,000 revenue for this campaign.

As the advertising income is attributable to both UK and non-UK users, the group should determine the UK relevant revenues on a just and reasonable basis. If it can identify the revenues received from UK users, this amount will be the just and reasonable answer.

If it is not able to determine how much revenues were attributable to the UK users, it will need to apportion the £9,000 on a just and reasonable basis. Depending on the information available to the group this could be either:

  • £6,750 – based on 75,000 views at the contract price of £.09 each
  • £7,500 – based on 75,000 views at the typical price of £0.10 each
  • £8,000 – based on the typical experience that in such campaigns 80% of views are UK users and 20% non-UK users. This information is reflected in the price charged to the advertiser such that the group expected to receive £9,000 but made up of £8,000 from UK users and £1,000 from others.

Other approaches might be acceptable based on what information is available.