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Legislation day: UK DST ‘remains a brave move’

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The government has published draft provisions to be included in Finance Bill 2019/20 (FB 2019/20) together with accompanying explanatory notes, responses to consultations and other supporting documents. The consultation on the draft legislation will run until 5 September 2019.

FB 2019/20 is expected to be introduced to Parliament in autumn 2019 (after the Budget) and to receive royal assent in spring 2020.

The majority of the provisions were previously announced, but there were some new announcements relating to:

  • deferral of corporation tax payments on EU group asset transfers; and
  • stamp taxes on securities: amendments to FA 1986 s 77A.

Four items of legislation have immediate or retrospective effect. These concern:

  • deferral of corporation tax on EU group asset transfers (effective 11 July 2019);
  • spreading transitional adjustments on new lease accounting rules (periods of account beginning on or after 1 January 2019);
  • CGT relief on loans to traders outside the UK (effective 24 January 2019); and
  • share loss relief for investments in companies outside the UK (effective 24 January 2019).

The draft Finance Bill provisions include those introducing a new 2% digital services tax on the revenues of certain businesses.

This legislation ‘appears to have undergone several revisions intended both to achieve more effectively the policy intention behind the legislation and to make it easier to administer’, noted Matthew Herrington, tax partner at KPMG UK.

‘There is clearly no appetite at present from the UK government to shelve the proposals pending wider global coordination,’ Herrington said. ‘However, it does remain to be seen whether this will change in light of [last week’s] announcement that the US may impose retaliatory tariffs relating to the French digital services tax.’

However, the CIOT repeated its view that national digital services taxes should only be used as stopgaps. CIOT president Glyn Fullelove said: ‘We understand why governments like those in the UK and France are attracted to a tax on the revenues of large digital companies. However uncoordinated unilateral measures like these will inevitably lead to less alignment of tax bases globally, resulting in double taxation and a significant compliance burden for businesses. As the reaction of the US government and Congress has shown, they are controversial and could lead to retaliation. Better for governments to work together than risk getting into tax wars.’

Ben Jones, Eversheds Sutherland’s head of tax in its London office, said that the UK’s DST ‘is almost opposite to the preferred direction of travel at international level. It targets a very limited group of activities in an even narrower group of multinational businesses, therefore ignoring the developing international consensus that it is not appropriate to ringfence and tax certain digital activities in this manner.’

Writing in this week’s Tax Journal (, Chris Sanger, EY’s tax policy leader, said that the introduction of a UK DST is a ‘brave move for the chancellor to make in the face of growing US opposition’.

‘Of course, a successor could take a different stance, and a credible, legislation-ready DST could be a useful tool for the bargaining table,’ Sanger added.

Issue: 1452
Categories: News