DST32000 - UK Users
The legislation defines a UK user as a user who it is reasonable to assume is either an individual normally located in the UK or, for businesses, established in the UK.
Meaning of normally located in the UK
The legislation says an individual user will be a UK user when they are normally located in the UK. It’s important to note the user’s location is based on their normal location, rather than their location at the time of the transaction giving rise to the Digital Services revenues.
The legislation does not define what it means to be ‘normally located’. It is not as prescriptive as concepts like citizenship or those used in other taxes like residence or domicile. Rather, it simply tests where the user is located most of the time. In most cases, this will be synonymous with the jurisdiction where the user lives.
Meaning of established
Similarly, the legislation does not define when a user is established in the UK. It is not the same thing as concepts like residence, a permanent establishment (PE) or a fixed establishment. This is because the group providing the digital services activity must make the judgement about the business user’s location. It would not be practical to expect the group to determine where a third-party business is resident for tax purposes or whether it has a PE with the same level of precision as it would for its own entities.
Established is intended to be a more flexible concept which allows the group to make a judgement where the user’s place of business activity is carried out from based on the information it holds about the user.
The ‘reasonable to assume’ test
The legislation says a user is a UK user when it is reasonable to assume they are normally located or established in the UK.
This is because some groups may not have enough information to objectively determine beyond doubt where a user is normally located or established. The ‘reasonable to assume’ test is a pragmatic test which is intended to reduce the compliance burden on groups and prevent them from needing to obtain more information from users than they collect in the course of their commercial activities.
It is effectively a test of probability. A user will be a UK user when it is more likely than not they are normally located in the UK. This judgement should be made based on the information available to the group. It will be a reasonable assumption when a reasonably informed and independent person would reach the same conclusion based on that evidence.
Example A
User A lives in the UK and visits Sodor on holiday. She sees an advertisement for a dating app in Elsbridge and decides to take out a subscription while on holiday. User A supplies a UK location to meet people, UK contact details and credit card details. User A is a UK user as it is reasonable to assume they are normally located in the UK.
User A also regularly uses a separate app to arrange local journeys, where the app introduces the user to an available transport provider. User A uses this app whilst on holiday in Sodor. The app has a history of previous journeys showing regular and frequent journeys in the UK. The app holds no further details such as payment history. As the only information available to the app links the user to the UK, it is reasonable to assume the user is normally located in the UK.
Example B
User B lives in Sodor and visits the UK on holiday. While in Bristol he sees an advertisement for a dating app and decides to take out a subscription. The details provided by User B mean it is reasonable to assume he is a not a UK user as he is normally located in Sodor.
Example C
User C is a company which operates a business in Sunderland. Employees of the company buy some fabric from an online marketplace. All the information the marketplace has about the business indicate it is normally established in the UK. The online marketplace submits its DST return and claims that the revenue from the transaction are not UK relevant revenues because User C is based in New Zealand. User C is a UK user, notwithstanding the online marketplace’s DST return. Based on the information available, the only reasonable conclusion to make is that User C is a UK user.
Example D
Group STU is a Supply Side Platform which auctions online advertising inventory to Demand Side Platforms and to large media and advertising agencies.
User D buys advertising space through STU. User D is a small business and the only information available to STU is User D’s company name and its bank account details, which use Avalon’s syntax. STU’s only information suggests User D is established in Avalon so it is reasonable to assume they are an Avalonian user.
It also facilitates the sale of advertising space to User E, which is the largest advertising agency in the world. User E is incorporated in Sodor. As STU’s largest trading account is with User E, STU has decided to employ dedicated customer relationship and account managers. The customer account managers liaise with User E staff in Avalon where User E has a large presence. User E’s Avalon office heads up trading in the Baklava Union (a large trade bloc which Avalon is a member of).
STU has considerable information about User E’s business because of its significant business relationship. It should consider the information available to it to determine where it is most likely User E’s place of business and activity is based. This is likely to be in Avalon. This is because STU is conducting business through the Avalon office and the trade which User E is conducting with STU is primarily focused on the Baklava Union market, whose business is conducted through Avalon.
Example E
Avalonian food becomes the latest popular food trend in the UK. A large exporter of Avalonian food produce wishes to take advantage of this newfound popularity and pays Group TUV, which operates a large social media platform, to display advertising to UK users. Group TUV targets advertisements to users with an IP address in the UK.
While an IP address only evidences a user’s location at a specific point in time, it is reasonable to assume users viewing an advert through a UK IP address are UK users in the absence of evidence to the contrary.
The Avalonian food exporter also purchases advertising inventory on an internet search engine operated by Group UVW. The terms of the contract specify the advertising should be displayed against search results for Avalonian food in the UK. UVW does not routinely collect geolocation data linking searches to individual users and only tracks user information when a user clicks through on an advert. The terms of the contract indicate the advertising is intended to be viewed by UK users and in the absence of other information, it is more likely than not that users searching for information in the UK will be normally located in the UK.
Users F and G click on the adverts on the search results. UVW has built up a profile of both users’ interests and demographics based on their previous search activity. User F is normally located in the UK while User G is about to go on holiday to the UK and is browsing for local restaurants. UVW should consider whether the information obtained about User F and G provides a more reliable picture of their normal location.