Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

This week's opinion: 8 August 2019

06 August 2019 / Andrew Hubbard
Issue: 4707 / Categories: Comment & Analysis
 A common definition of digital would be helpful

In my article on the draft finance bill (‘And here we go again’, 25 July 2019, page 8) I made the comment: ‘I doubt that many readers of this magazine will need to have much to do with the digital services tax in practice.’

A few colleagues have discussed this with me and suggested that my view might be too narrow. Although the tax is intended to be very precisely targeted there is an emerging view that the net has in fact been more widely drawn.

The concern is that the UK government is trying to define the scope by reference to business models and any revenues that might be attributed to those models on a ‘just and reasonable’ basis even if the activity itself does not directly earn any revenue. The more targeted approach taken elsewhere looks at defined revenue streams.

Given that the tax grew out of the efforts of revenue authorities around the world to tackle the perceived problem in a co-ordinated way it is, to say the least, disappointing that a common definition of what is meant by a digital service has not been achieved.

The Confederation of British Industry has already expressed concerns about scope creep and the number of companies that could be brought into the net. Even if they eventually conclude that they are not subject to the tax they will still have to go through the time-consuming exercise of proving it.

The digital services tax is still not something that most advisers will have to deal with, but readers’ comments have persuaded me that more businesses than I thought will at least have to consider its impact. Taxation thrives on feedback so keep it coming.

If you do one thing...

Read paragraphs 31 to 47 of the Court of Appeal’s decision in Tinkler v CRC; it has some interesting observations on the legal basis of form 64-8.

Issue: 4707 / Categories: Comment & Analysis
back to top icon