Finance Bill (HC Bill 114)

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46 Charge to DST

(1)This section applies where the threshold conditions are met in relation to a
group for an accounting period.

(2)Each person who was a member of the group in the accounting period (a
5“relevant person”) is liable to digital services tax in respect of UK digital
services revenues arising in that period.

(3)To find the liability of a relevant person to digital services tax in respect of the
accounting period, take the following steps.

Step 1

10Take the total amount of UK digital services revenues arising to members of
the group in the accounting period.

Step 2

Deduct £25million from the amount found under step 1.

Step 3

15Calculate 2% of the amount calculated under step 2.

The result is “the group amount”.

Step 4

The relevant person’s liability to digital services tax in respect of the
accounting period is the appropriate proportion of the group amount.

(4)20In this section “the appropriate proportion” means such proportion of the total
amount of UK digital services revenues arising to members of the group in the
accounting period as is attributable to the relevant person.

(5)If the duration of the accounting period is less than a year, the sum mentioned
in step 2 of subsection (3) is proportionately reduced.

(6)25This section is subject to section 47 (alternative basis of charge).

47 Alternative basis of charge

(1)This section applies if a valid election under this section in respect of an
accounting period has been made in the group’s DST return for that period
(whether as originally made or by amendment).

(2)30An election under this section is valid if it specifies the categories of revenues
in relation to which it applies (or specifies that it applies in relation to all
categories).

(3)For this purpose, the categories of revenues are—

(a)revenues arising in connection with any social media service;

(b)35revenues arising in connection with any internet search engine;

(c)revenues arising in connection with any online marketplace.

(4)To find the liability of a relevant person to digital services tax in respect of the
accounting period, take the following steps (instead of the steps set out in
section 46(3)).

Step 1

Take the total amount of UK digital services revenues arising to members of
the group in the accounting period.

Step 2

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Apportion the total amount found under step 1 between the three categories of
revenues.

Step 3

For each category of revenues, the “net revenues” is the amount by which the
5amount of revenues apportioned under step 2 exceeds the relevant proportion
of £25million.

“The relevant proportion” is—

where—10

(a)

R is the amount of revenues apportioned under step 2 to the category,
and

(b)

TR is the total amount found under step 1.

Step 4

15For each specified category of revenues, calculate the operating margin.

“The operating margin” is—

where—

(a)

20R has the same meaning as in step 3, and

(b)

E is the amount of relevant operating expenses of the group that are
recognised in the accounting period (as to which, see section 48).

If R does not exceed E, the operating margin is nil.

Step 5

25For each specified category of revenues, the taxable amount is 0.8 x the
operating margin x the net revenues.

For any other category of revenues, the taxable amount is 2% of the net
revenues.

Step 6

30Add together the taxable amounts calculated under step 5.

The result is “the group amount”.

Step 7

The relevant person’s liability to digital services tax in respect of the
accounting period is the appropriate proportion of the group amount.

(5)35If the duration of the accounting period is less than a year, the sum mentioned
in step 3 of subsection (4) is proportionately reduced.

(6)In this section—

  • “the appropriate proportion” has the meaning given by section 46;

  • “relevant person” has the same meaning as in section 46;

  • 40“specified”, in relation to a category of revenues, means a category of
    revenues specified in the election.

48 Section 47: meaning of “relevant operating expenses”

(1)This section supplements section 47.

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(2)The “relevant operating expenses” of a group, in relation to a specified
category of revenues, means any expenses of a member of the group
attributable to the earning of UK digital services revenues within the specified
category, except excluded expenses.

(3)5“Excluded expenses” means any expenses—

(a)in respect of interest (or anything equivalent, from a commercial
perspective, to interest),

(b)attributable to the acquisition of a business or part of a business,

(c)occurring otherwise than in the normal course of business,

(d)10resulting from a change in the valuation of any tangible or intangible
asset, or

(e)in respect of any tax (arising under the law of any territory).

(4)Where expenses are attributable to—

(a)the earning of UK digital services revenues within the specified
15category, and

(b)anything else,

the expenses are to be treated as relevant operating expenses to such extent as
is just and reasonable.

(5)In this section “specified” has the meaning given by section 47.

49 20Relief for certain cross-border transactions

(1)This section applies if a claim under this section in respect of an accounting
period has been included in the group’s DST return for that period (whether as
originally made or by amendment).

(2)For the purposes of step 1 in section 46(3) or 47(4), disregard 50% of any UK
25digital services revenues arising to a member of the group in the accounting
period in connection with a relevant cross-border transaction.

(3)For the purposes of step 4 in section 47(4), disregard 50% of any relevant
operating expenses of a member of the group recognised in the accounting
period that result from a relevant cross-border transaction.

(4)30“Relevant cross-border transaction” means a marketplace transaction where—

(a)the online marketplace is provided by a member of the group,

(b)a foreign user is a party to the transaction, and

(c)all or part of any revenues arising to a member of the group in
connection with the transaction are (or would be) subject to a foreign
35DST charge.

(5)In this section—

  • “foreign user” means a user who it is reasonable to assume—

    (a)

    in the case of an individual, is normally in a territory outside the
    United Kingdom;

    (b)

    40in any other case, is established in a territory outside the United
    Kingdom,

    and a reference to the foreign user’s “territory” is to be read
    accordingly;

  • “foreign DST charge” means a charge (known by any name) under the law
    45of the foreign user’s territory which is similar to digital services tax;

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  • “marketplace transaction” has the meaning given by section 40;

  • “relevant operating expenses” has the meaning given by section 48.

50 When DST is due and payable

Digital services tax in respect of an accounting period is due and payable on
5the day following the end of 9 months from the end of the accounting period.

Duty to submit returns etc

51 Meaning of “the responsible member”

(1)In this Part any reference to “the responsible member” of a group, at any time,
is a reference to the following person—

(a)10if at that time a nomination under subsection (2) is in force, the person
nominated;

(b)otherwise, the parent of the group.

(2)The parent of a group may nominate a person to be “the responsible member”
of the group if—

(a)15the person is a member of the group,

(b)the person is a company, and

(c)the parent agrees in writing to provide the person with everything the
person may reasonably require in order to comply with—

(i)any obligation imposed by or under this Part, or

(ii)20any other obligation imposed on the person in connection with
any digital services tax liability of any member of the group.

(3)A nomination is in force from the time it is made until any of the following
events occurs—

(a)the parent nominates another person;

(b)25the person nominated ceases to be a member of the group or ceases to
be a company;

(c)an officer of Revenue and Customs or the parent revokes the
nomination.

(4)An officer of Revenue and Customs may revoke a nomination only if the officer
30has reason to believe that the person nominated—

(a)is not being provided with something the person reasonably requires in
order to comply with an obligation of a kind mentioned in subsection
(2)(c), or

(b)is not complying with any such obligation.

(5)35An officer of Revenue and Customs revokes a nomination by notifying the
parent and the nominated person of the revocation.

The revocation has effect when the notification is issued.

(6)Any nomination, or revocation of a nomination, must be in writing.

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52 Continuity of obligations etc where change in the responsible member

(1)This section applies if at any time (“the relevant time”) a person (“the new
responsible member”) becomes the responsible member of a group in place of
another person (“the old responsible member”).

(2)5The relevant obligations and liabilities of the new responsible member include
any relevant obligations and liabilities of the old responsible member as
respects the group.

(3)Anything done as respects the group by or in relation to the old responsible
member, before the relevant time, is treated as having been done by or in
10relation to the new responsible member.

(4)Accordingly, a penalty may be imposed on the new responsible member in
respect of anything done before the relevant time if, at that time, a penalty
could have been imposed on the old responsible member in respect of the thing
done.

(5)15Anything done by HMRC in relation to the old responsible member as respects
the group, before the end of the day the change is notified, is treated for all
relevant purposes as done by or in relation to the new responsible member.

(6)Anything (including any proceedings) relating to the group that, at any time
during the period beginning with the relevant time and ending with the day
20the change is notified, is in the process of being done in relation to the old
responsible member may be continued in relation to the new responsible
member.

(7)Accordingly, any reference in an enactment or other instrument to the
responsible member of the group is to be read, so far as necessary for the
25purposes of giving effect to any of subsections (2) to (6), as being or including
a reference to the new responsible member.

(8)In this section—

(a)any reference to an act includes an omission;

(b)any reference to the day the change is notified is to the day on which an
30officer of Revenue and Customs receives notification, in accordance
with section 54, that the new responsible member has become the
responsible member of the group;

(c)“relevant obligations and liabilities” means any obligations or other
liabilities relating to digital services tax;

(d)35“relevant purposes” means any purposes relating to digital services tax.

(9)Nothing in this section—

(a)prevents HMRC or anyone else, after the relevant time, from imposing
a penalty, exercising any other power, or doing anything else, in
relation to the old responsible member in respect of anything done
40before the relevant time, or

(b)affects the validity of anything done before the relevant time.

53 Duty to notify HMRC when threshold conditions are met

(1)This section applies—

(a)in relation to the first accounting period of a group in respect of which
45the threshold conditions are met, and

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(b)where a direction under section 55 has been given in respect of a group,
in relation to the first relevant accounting period in respect of which the
threshold conditions are met.

In paragraph (b) “relevant accounting period” means the accounting period
5specified in the direction or any subsequent accounting period.

(2)The responsible member must provide specified information to HMRC.

(3)The information must be provided in the specified way.

(4)The information must be provided before the end of the period of 90 days from
the end of the accounting period.

(5)10In subsections (2) and (3) “specified” means specified in a notice published by
HMRC.

54 Duty to notify HMRC of change in relevant information

(1)This section applies where section 53 applies or has applied in relation to a
group.

(2)15If at any relevant time there is a change in relevant information relating to the
group, the responsible member must notify HMRC of that change.

(3)The notification must be given in the specified way.

(4)The notification must be given before the end of the period of 90 days
beginning with the day on which the change occurs.

(5)20In subsection (3) “specified” means specified in a notice published by HMRC.

(6)In this section—

  • “relevant information” means information of a kind specified under
    section 53(2);

  • “relevant time” means any time—

    (a)

    25after the time when the information is provided under section
    53 or (if earlier) the last time by which the information may be
    provided in accordance with that section, and

    (b)

    before the giving of a direction under section 55 in relation to
    the group.

55 30Duty to file returns

(1)This section applies where the threshold conditions are met in relation to a
group for an accounting period.

(2)The responsible member must deliver a DST return—

(a)for the accounting period, and

(b)35for each subsequent accounting period, subject to subsection (3).

(3)An officer of Revenue and Customs may, on the application of the responsible
member, direct that the duty to deliver a DST return does not apply in relation
to an accounting period specified in the direction or subsequent accounting
periods.

(4)40Such a direction may be given only if it appears to the officer that the threshold
conditions will not be met in relation to the group for any accounting period
beginning with the specified accounting period.

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(5)Nothing in a direction under subsection (3) prevents the further application of
this section to the group, in any subsequent accounting period in which the
threshold conditions are met.

(6)Schedule 7 contains provision about DST returns, enquiries, assessments etc.

5Groups, parents and members

56 Meaning of “group”, “parent” etc

(1)In this Part “group” means—

(a)any entity which—

(i)is a relevant entity (see section 57), and

(ii)10meets condition A or B (see subsections (2) and (3)), and

(b)each subsidiary (if any) of the entity mentioned in paragraph (a).

(2)Condition A is that the entity—

(a)is a member of a GAAP group, and

(b)is not a subsidiary of an entity that—

(i)15is a relevant entity, and

(ii)itself meets condition A.

(3)Condition B is that the entity is not a member of a GAAP group.

(4)In this Part—

(a)references to the “parent” of a group are to the entity mentioned in
20subsection (1)(a);

(b)references to a “member” of a group are to an entity mentioned in
subsection (1)(a) or (b);

(c)“subsidiary” has the meaning given by the applicable accounting
standards.

(5)25In this section “GAAP group” means a group within the meaning of the
applicable accounting standards.

(6)For the meaning of “the applicable accounting standards” see section 63.

57 Section 56: meaning of “relevant entity”

(1)In section 56 “relevant entity” means—

(a)30a company, or

(b)an entity the shares or other interests in which are listed on a recognised
stock exchange and are sufficiently widely held.

(2)Shares or other interests in an entity are “sufficiently widely held” if no
participator in the entity holds more than 10% by value of all the shares or other
35interests in the entity.

(3)The following are not relevant entities—

(a)the Crown;

(b)a Minister of the Crown;

(c)a government department;

(d)40a Northern Ireland department;

(e)a foreign sovereign power.

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(4)In this section—

(a)“participator” has the meaning given by section 454 of CTA 2010;

(b)“recognised stock exchange” has the meaning given by section 1137 of
CTA 2010;

(c)5the reference to shares or other interests being listed on a recognised
stock exchange is to be read in accordance with section 1137 of CTA
2010.

(5)For the meaning of “company” see section 71.

58 Continuity of a group over time

(1)10In this Part, this section applies for the purpose of determining whether a
group at any time (Time 2) is the same group as a group at any earlier time
(Time 1).

(2)The group at Time 2 is the same group as the group at Time 1 if and only if the
entity that is the parent of the group at Time 2—

(a)15was the parent of the group at Time 1, and

(b)was the parent of a group at all times between Time 1 and Time 2.

59 Treatment of stapled entities

(1)This section applies where two or more entities—

(a)would, apart from this section, be the parent of a group, and

(b)20are stapled to each other.

(2)This Part applies as if—

(a)the entities were subsidiaries of another entity (the “deemed parent”),
and

(b)the deemed parent were within section 56(1)(a) (conditions for being
25the parent of a group).

(3)For the purpose of this section, an entity (A) is “stapled” to another entity (B)
if, in consequence of the nature of the rights attaching to the shares or other
interests in A (including any terms or conditions attaching to the right to
transfer the interests), it is necessary or advantageous for a person who has,
30disposes of or acquires shares or other interests in A also to have, dispose of or
acquire shares or other interests in B.

Accounting periods, accounts etc

60 Accounting periods and meaning of “a group’s accounts”

(1)This section applies for the purposes of this Part.

(2)35A group’s first accounting period—

(a)begins with 1 April 2020, and

(b)ends with the first accounting reference date to occur after that date or,
if earlier, with 31 March 2021.

This is subject to subsection (4) (rule for groups coming into existence after 1
40April 2020).

(3)Any other accounting period of a group—

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(a)begins immediately after the end of the previous accounting period,
and

(b)ends with the first accounting reference date to occur after it begins or,
if earlier, one year after it begins.

(4)5In the case of a group formed after 1 April 2020, its first accounting period—

(a)begins with the date on which it is formed, and

(b)ends with the first accounting reference date to occur after that date or,
if earlier, one year after it begins.

(5)In this section “accounting reference date” means the date to which the group’s
10accounts are made up.

(6)Any reference to a group’s accounts is to—

(a)the consolidated accounts of the group’s parent and its subsidiaries, or

(b)the parent’s accounts (if the parent is the only member of the group
throughout the period in question).

61 15Apportionment of revenues or expenses to accounting period

(1)This section applies if a group’s period of account does not coincide with an
accounting period.

(2)The revenues or expenses of a period of account may be apportioned to the
parts of that period falling within different accounting periods.

(3)20The apportionment must be made by reference to the number of days in the
periods concerned.

62 Meaning of revenues arising, or expenses recognised, in a period

(1)In this Part any reference to revenues arising to members of a group in a period,
or to expenses of members of a group recognised in a period, is to be
25interpreted as follows.

(2)For any period of account of the group for which the group’s accounts are
produced in accordance with the applicable accounting standards, the
reference is to—

(a)revenues (however described) or expenses recognised in the income
30statement (or in profit and loss) for that period, or

(b)if any consolidation exemption applies, to revenues (however
described) or expenses that would be recognised in the income
statement (or in profit and loss) for that period if no consolidation
exemption were applicable.

(3)35For any period of account of the group not falling within subsection (2), the
reference is to revenues or expenses that would be recognised in the income
statement (or in profit and loss) in the group’s accounts produced in
accordance with IAS for the period if such accounts were produced (and no
consolidation exemption was applicable).

(4)40If the group does not produce accounts for any period (“the relevant period”)
in an accounting period, the reference is to revenues or expenses that would be
recognised in the income statement (or in profit and loss) in the group’s
accounts produced in accordance with IAS for the relevant period if such
accounts were produced (and no consolidation exemption was applicable).

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(5)In this section “consolidation exemption” means any exemption in the
applicable accounting standards from a requirement to consolidate revenues.

63 Meaning of “the applicable accounting standards” etc

(1)This section applies for the purposes of this Part.

(2)5“The applicable accounting standards”, in relation to a group, means—

(a)for any period for which the group’s accounts are produced in
accordance with UKGAAP, UKGAAP;

(b)for any period for which the group’s accounts are produced in
accordance with acceptable overseas GAAP, acceptable overseas
10GAAP;

(c)for any period for which the group’s accounts are produced in
accordance with a specified standard, that standard;

(d)otherwise, IAS.

(3)UKGAAP”—

(a)15means generally accepted accounting practice in relation to accounts of
UK companies (other than accounts prepared in accordance with IAS)
that are intended to give a true and fair view, and

(b)has the same meaning in relation to persons other than companies, and
companies that are not UK companies, as it has in relation to UK
20companies.

UK companies” here means companies incorporated or formed under the law
of a part of the United Kingdom.

(4)“Acceptable overseas GAAP” means the generally accepted accounting
practice and principles of any of the following—

  • 25Canada;

  • China;

  • Japan;

  • South Korea;

  • the United States of America.

(5)30IAS” means—

(a)International Accounting Standards,

(b)International Financial Reporting Standards, and

(c)related interpretations,

issued or adopted, from time to time, by the International Accounting
35Standards Board.

(6)In subsection (2)(c), “specified” means specified in a notice published by
HMRC.

Supplementary

64 Anti-avoidance

(1)40Any tax advantage that would (apart from this section) arise from relevant
avoidance arrangements is to be counteracted by the making of such
adjustments as are just and reasonable.