Compliance issues answered in the HMRC guidance include the following.
- Who is to register for the digital services tax. This is based on previously published guidance detailing the scope of the new law.
- When and how to register with HMRC. This must be done within 90 days of the end of the first relevant accounting period—so, for example, by 31 March 2021 for a 31 December 2020 year-end.
- How to register a group. This includes choosing a company to be the group’s responsible member, and the responsibilities of that company (including registration, submission of the digital services tax return, calculation of the tax, and keeping and maintaining records and dealing with any HMRC queries).
- When and how to submit the digital services tax return. This must be done within 12 months of the end of the accounting period—so, for example, by 31 December 2021 for a 31 December 2020 year-end.
- What information to be included in the digital services tax return. This includes the company’s or group’s total digital services tax liability for the period, the liability (per group company), the use of the £25 million annual allowance, and details of the use of any applicable reliefs (e.g., the low margin exemption and/or the cross-border relief).
- How to amend a previously-submitted digital services tax return. This can be done up until two years from the end of the accounting period—so, for example, until 31 December 2022, for a 31 December 2020 year-end.
- How and when to pay digital services tax. This must be done by nine months and one day after the end of the relevant accounting period—so, for example, by 1 October 2021 for a 31 December 2020 year-end.
While some compliance and payment deadlines are not immediately imminent, accurately tracking and reporting in-scope revenues to the level of detail required may be a challenge for some groups (particularly when taxpayers expect to make use of one or more of the available reliefs—e.g., the low margin exemption or the cross-border transaction relief for online marketplaces).
Taxpayers may also want to consider the implications that the tax may have on commercial decisions such as pricing. These aspects of the digital services tax may need to be considered as a matter of urgency for potentially affected groups.
Read an April 2020 report prepared by the KPMG member firm in the UK