Digital Services Tax: initial equality impact assessment
Published 26 November 2020
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This publication is available at https://www.gov.uk/government/publications/digital-services-tax/digital-services-tax-initial-equality-impact-assessment
Project objectives
From April 2020, the government will introduce a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.
The application of the current corporate tax rules to businesses operating in the digital economy has led to a misalignment between the place where profits are taxed and the place where value is created. In particular, many of these digital businesses derive value from their interaction and engagement with a user base.
Under the current international tax framework, the value a business derives from user participation is not taken into account when allocating the profits of a business between different countries. This measure will ensure large multinational businesses make a fair contribution to supporting vital public services.
Businesses will be liable to Digital Services Tax when the group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.
Businesses will be able to elect to calculate Digital Services Tax (DST) under an alternative calculation under the ‘safe harbour’. This is intended to ensure that the DST does not have a disproportionate effect on business sustainability in cases where a business has a low operating margin from providing in-scope activities to UK users.
A single entity in the group will be responsible for reporting the DST to HMRC. Groups can nominate an entity to fulfil these responsibilities. Otherwise, the ultimate parent of the group will be responsible. The DST will be payable and reportable on an annual basis.
This will impact companies only, not individuals.
Customer groups affected
The customer groups that will be impacted by the change are:
- large corporate groups with relevant revenue above the necessary thresholds
- agents
- accountancy firms
What customers will need to do
As a result of this change, customers will need to:
- be aware of the new tax
- make payments of the 2% tax on revenues and be aware of how to do this
- submit annual DST returns, and inform HMRC of changes
- be aware of the process to appeal any HMRC decisions
Assessing the impact
We assessed the equality impacts on all the protected characteristic groups in line with the Equality Act and Public Sector Equality Duty and section 75 of the Northern Ireland Act.
Racial groups
Impact on customers
The DST population will be made up of large companies and groups. We do not anticipate that there will be impacts on customers within this protected characteristic group.
Disabled and not disabled
Impact on customers
No impact anticipated, as above.
Gender
Impact on customers
No impact anticipated, as above.
Gender reassignment
Impact on customers
No impact anticipated, as above.
Sexual orientation
Impact on customers
No impact anticipated, as above.
Age
Impact on customers
No impact anticipated, as above.
Religion or belief
Impact on customers
No impact anticipated, as above.
Pregnancy and maternity
Impact on customers
No impact anticipated, as above.
Marriage and civil partnership
Impact on customers
No impact anticipated, as above.
People with dependents and those without
Impact on customers
No impact anticipated, as above.
Political opinion (for Northern Ireland only)
Impact on customers
No impact anticipated, as above.
People who use different languages (Including Welsh Language and British Sign Language)
Impact on customers
No impact anticipated, as above.
Opportunities to promote equalities
We have considered opportunities to promote equalities and good relations between people in each of the protected characteristic groups and those outside of that group. None have been identified within the scope of this project.