One third of tech giants under digital services tax faced investigations by HMRC
One third of tech giants that pay the UK’s new digital services tax have already been subjected to checks by HMRC, says national law firm Pinsent Masons.
The digital services tax was introduced at the 2020 Budget in a move to ensure tech giants pay their fair share of tax, as they would be charged 2 per cent levy on sales for certain digital businesses.
According to HMRC, the new tax has already raised £567m in tax in the past year (year end March 2023), up 49 per cent from the £380m raised in its first year.
The Pinsent Mason release stated that the year following the implementation of the tax, six of the 18 tech giants have been through compliance checks by the HMRC.
Sophie Warren, tax manager at Pinsent Masons, warned that HMRC will be keenly focusing on the business models adopted by major tech businesses and how they are representing their revenues to be in or out of scope for the digital services tax.
Warren explained: “As this is a very new tax, there’s a lot of scope for differing interpretations of the rules and HMRC has been tightly focused on making sure digital businesses pay all the digital services tax they owe.
“That has likely led to it opening a proportionately large number of investigations ‘pre-emptively’ to make sure all UK revenues are being booked properly in the UK. HMRC will clearly be looking to make sure businesses follow their interpretation of the law on digital services tax now and going forward,” she added.
She highlighted that a compliance check doesn’t necessarily mean there has been “any element of non-compliance”. The outcome can then range from no action to an increased tax or it might lead to “a dispute on interpretation.”