December 2020

UK Digital Services Tax

by Matt Stringer

On Budget day, 29 October 2018, Chancellor Phillip Hammond announced the arrival of a new UK tax: the digital services tax ('DST'). Fast forward two years and UK DST is law, effective 1 April 2020 and included in Finance Act 2020.

DST is a radical divergence from several well-established international tax principles. It is a tax on gross revenues (rather than profits). It exists outside the remit of the arm's length principle and the UK's treaty network. DST could apply where, under traditional methods, no profits should be allocated to the UK or where businesses have no UK taxable presence for corporation tax purposes.

In this Digest we will start by considering the history of the digital tax debate and the drivers for this new UK tax. We will then explore the workings of the tax in detail before moving on to consider the shelf life and future prospect for the tax, considering multinational developments.

About the author

Matt Stringer leads international tax for Grant Thornton UK LLP in London, having joined in 2018 following experience at both EY and PwC. Matt has ten years of experience in corporate and international tax and his clients include many mid-sized businesses and large corporates. He has experience in a broad range of industries, with a focus on the Technology, Media and Telecoms space. Specialist areas include supply chain restructuring, cross-border financing, BEPS/ATAD developments and diverted profits tax. In a more typical year, Matt spends much of his time travelling, and many of his clients are US-based multinationals.

He is a qualified Chartered Accountant and Chartered Tax Advisor, obtaining national prizes in both sets of exams for his achievements, including the Institute Gold Medal from the CIOT.

Matt writes for external tax publications, including Tax Adviser magazine and the Tolley's Finance Act Handbook in relation to international matters.