How will the UK's digital tax impact the tech sector?
Business Management

How will the UK's digital tax impact the tech sector?

In the next year, the way in which technology companies operate in the UK will be transformed greatly with the introduction of a new Digital Services Tax.

Unveiled as part of the 2018 Budget, the tax will come into force in April 2020 and result in search engines, social media platforms, online marketplaces and other technology companies paying a 2% levy on their revenues.

According to the government, the tax will mainly affect "large multinational enterprises with revenue derived from the provision of a social media platform, a search engine or an online marketplace to UK users".

"The Digital Services Tax will apply to businesses that provide a social media platform, search engine or an online marketplace to UK users," explained officials. "These businesses will be liable to Digital Services Tax when the group's worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users".

However, many experts fear that the tax could have a detrimental impact on Britain's technology sector. "The proposed Digital Services Tax is not the global, joined-up solution required to level the playing field for large internet firms. Instead, it risks seriously inhibiting the growth of UK tech companies," says Stephen Hemmings, tax partner at accountancy firm Menzies LLP.

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Nicholas Fearn

Nicholas is a technology journalist from the Welsh valleys. His work has been featured on Engadget, Lifehacker, Gizmodo, TechRadar, The Next Web, Forbes, Computer Weekly, Computing, Mail Online, The Telegraph and many other media outlets. In addition, he edits Tech Dragons, a publication covering STEM in Wales.

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