DST31400 - Identifying Business Users in a Corporate Group

Multinational groups typically operate internationally through many different legal entities. This raises a question about how to identify the appropriate user for DST.

For instance, Group EFG is headquartered in Avalon. It has a subsidiary, Company A, which was incorporated in Sodor but whose head office is based in Baskerville. Company A has a permanent establishment in the UK. Any of these could be said to be the user of the online service.

This section outlines how HMRC interprets these rules. Firstly, the legislation does not stipulate who the relevant user is. The user will consequently be the entity that uses the online service, in the same way as it is for individuals.

Secondly, there is a rebuttable presumption that the entity contracting with the online service is the relevant user in a group. The test will then involve determining where that entity is established, which is explained further in DST32000. Where the entity has business operations in multiple jurisdictions, this involves an understanding of which part of the entity the service is being provided to.

Thirdly, the presumption can be overridden or rebutted where it is clear from the evidence that the contracting entity is acquiring the service on behalf of other entities in the group. This rebuttal is likely to be rare; there is no requirement on groups to collect further evidence from its customers or to establish who the ultimate user of the service is if this information is not already collected in the course of their commercial activities.

Finally, all of this should be considered in conjunction with the rules determining a user’s location. In particular, a user is a UK user when it is reasonable to assume they are established in the UK. This takes into account the information available to the business.

It should be noted the targeted anti-avoidance rule may apply to arrangements between a group and its customers to route transactions through a non-UK user. This will be the case where the arrangements have a main purpose of achieving a DST tax advantage.

Example

Group GHI is an Avalon headquartered group which sells toilet roll through Group HIJ’s online marketplace. GHI UK Ltd is the contracting party which sells the goods. The registered office address is in the UK and the online marketplaces charges are paid through a UK bank account.

In this case, the user appears to be GHI UK Ltd.