DST43400 - Alternative Charge Election
Groups can elect to calculate their DST liability using the alternative charge calculation instead of the standard calculation of 2% of UK Digital Services Revenues. If a group makes this election, its DST liability will be calculated by applying a formula.
The effect of the formula is to reduce the DST rate charged when the group’s operating margin from providing digital services activities to UK users is very low. If the group makes a loss on providing these in-scope digital services to UK users, it will not have to pay DST.
DST43410 provides more information on how to calculate DST liabilities under the alternative charge.
Purpose of the Alternative Charge
The alternative charge election is designed to mitigate the impact of DST in cases where applying a tax on gross revenues could have a disproportionate impact and make a digital services activity economically unviable. The election is only of benefit in cases where there is a very low operating margin on the digital services activity.
How to make the election
The election is annual. Groups must make an election in each accounting period they wish to calculate their DST liability using the alternative charge.
The election applies to each category of digital services activity. So, a group that provides two social media services and an internet search engine can make one election for its social media services and another for its internet search engine.
The election must be made in the group’s DST return (or amended return). The election will only be valid if the group specifies which categories of Digital Services Activity it wishes to apply the alternative charge calculation to.