Chancellor Philip Hammond said the new digital economy raised wider concerns about the tax system, and indicated in his Budget that the UK intends to take action ahead of reaching agreements at an international level about the way forward
‘Along with innovation and growth the digital age poses challenges to sustainability and fairness which can only be solved on an international basis via the OECD and the G20.
‘I am publishing a position paper on the tax challenges posed by the digital economy outlining our emerging thinking on potential solutions,’ Hammond said.
Hammond said the Treasury will take ‘what action we can’, specifically in regards to multinational digital businesses which assign royalties to jurisdictions where they are not taxed, noting that in some cases these related to UK sales.
‘From April 2019 we will apply income tax to royalties relating to UK sales when paid to low tax jurisdictions even if they don’t fall to be taxed in the UK under current rules,’ he said.
The measure is expected to raise £200m a year.
Hammond said: ‘This doesn’t solve the problem but does send a signal of our determination.’
The Chancellor also pledged further action on online VAT fraud which he said costs the UK £1.2bn a year, including making all online marketplaces jointly liable with sellers for VAT.
