UK: House of Commons passes digital services tax legislation

UK: House of Commons passes digital services tax

The House of Commons on 2 July 2020 passed Finance Bill 2020 that includes the proposal for a digital services tax (scheduled to be effective retroactively from 1 April 2020)—thus, moving the UK a step closer to enacting its digital services tax legislation.

1000

Related content

Having passed through the House of Commons, the next steps for Finance Bill 2020 are the second reading and remaining stages in the House of Lords—scheduled for 17 July 2020.


UK digital services tax—overview

The digital services tax would be a tax at a rate of 2% imposed on revenue on certain digital income streams connected to UK users (effective from 1 April 2020). The tax would be calculated based on relevant revenue as recognised in the financial statements and would apply only to a global group that exceeds the following thresholds in a 12-month period:

  • £500 million of worldwide revenue from digital services activities; and
  • £25 million of these revenues attributable to UK users (UK digital services revenues).

The legislation contains a requirement for the government to review the digital services tax in 2025 and provide a revenue assessment of its impact. However, proposals that would have required the government to report annually on the tax and include in the annual report an assessment of its revenue effect were ultimately voted down in the House of Commons.

The UK’s digital services tax is still expected to be a temporary measure, pending an international consensus on the OECD’s work into the taxation of the digitalised economy (or BEPS 2.0).

Read a July 2020 report prepared by the KPMG member firm in the UK

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal