In the Budget Chancellor Philip Hammond confirmed the UK’s plan to go it alone with a digital services tax (DST), reflecting the Treasury’s frustration with the slow progress of a planned global solution. He announced that from April 2020, the government will introduce a new 2% tax on the revenues of certain digital businesses. The focus of the new DST is solely on ‘digital’ business models, so it will not impact perceived tax avoiders in other sectors, including some technology companies. 

We have previously had legislation targeting multinational business structures impacting both digital and non-digital business models, such as diverted profits tax (DPT). In this budget there are additional new rules to discourage the offshore exploitation of intellectual property (IP) in low tax, non treaty territories, through the imposition of UK income tax on non-resident IP owning companies. Multinational groups routing income through tax haven territories will potentially be caught by these rules.