To try and ensure that digital businesses pay tax that reflects the value they derive from UK users, the government has announced that it will introduce a Digital Services Tax (DST) which will raise £1.5bn over four years from April 2020.
The DST applies a 2% tax on the revenues of specific digital business models where their revenues are linked the participation of UK users. The tax will apply to:
- search engines
- social media platforms
- online marketplaces.
The above have been chosen as the government considers these business models derive significant value from the participation of their users.
Note however that the DST is not a tax on online sales of goods – as a result it will only apply to revenues earnt from intermediating such sales, not from making the online sale.