You are here: Home - Investing - Experienced Investor - News -

Warning to investors as digital services tax looms

0
Written by: Emma Lunn
12/07/2019
HMRC has announced a new 2 per cent tax on web firms with a UK presence.

From April 2020, the government plans to introduce a new 2 per cent tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.

Consultations on the draft legislation will run until 5 September, with measures included in the next Finance Bill.

The digital services tax will only apply to companies with worldwide revenue of more than £500m of which in excess of £25m is derived from UK customers.

So those running start-ups or small businesses or who operate at a loss will not be asked to pay.

The government predicts the tax will add £275m to the public coffers in the coming financial year, assuming it is comes into effect as planned in the 2020 budget, rising to £440m by 2023. It will cost an estimated £8m for additional staff, IT facilities, and administrative overheads.

Jesse Norman, financial secretary to the Treasury and Paymaster General, said: “The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate digital services tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement.”

This week also saw the French government approve a new tax that will see large technology companies pay a tax of 3 per cent on local revenue. It will apply to firms with global sales of over £674m and those that make more than £22.5m a year in France.

The introduction of the French tax has been met by criticism from the US with President Trump viewing the tax as an attempt to neuter US firms.

Adrian Lowcock, head of personal investing at Willis Owen, said: “Although the US may politically baulk at technology taxes they look to be inevitable, with the UK and France leading the way. The tax rates may seem low but investors should remember that they are on revenues, not profits, as technology companies have become experts at booking profits in low tax jurisdictions.

“Markets have been pricing some tech giants for perfection – namely that they will continue to grow at the same rate indefinitely, will become masters in any market they choose to compete in, and will see profits rise inexorably. However, there are always risks for any business and the more profits you make the greater some of those risks become. As tech giants become ever larger and generate more GDP than some countries, governments will step in to regulate and tax them where competitors do not, or cannot, keep them in check.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

  • “Families tend not to talk about money and death. But if we don’t talk about these themes it becomes very hard to m… https://t.co/YsaDJzyClW
  • RT @STEPSociety: UK Ministry of Justice abandons plan to increase EW probate fees, described by STEP’s Emily Deane TEP as a stealth tax on…
  • RT @STEPSociety: UK Ministry of Justice abandons plan to increase EW probate fees, described by STEP’s Emily Deane TEP as a stealth tax on…

Read previous post:
Santander enlists Kurupt FM crew to combat fraud

Santander has launched its latest fraud awareness campaign: “MC Grindah’s Deadliest Dupes”.

Close