A number of charities have contacted CTG to ask about the implications of the proposed Digital Services Tax, which is currently subject to consultation by HMRC, following its announcement in the Budget last year.
CTG’s understanding has always been that this is unlikely to affect charities and this has been confirmed by recently published guidance on the new tax.
It is not a tax on online sales (which some charities may be involved in), but is instead a narrowly-targeted tax on the UK revenues of digital businesses that are considered to derive significant value from the participation of their users. The business activities within scope will be the provision of a social media platform, search engine or online marketplace. It will also only affect those business that generate more than £500 million in global annual revenues from inscope business activities and generate more than £25 million in annual revenues from in-scope business activities linked to the participation of UK users. It is effectively a tax on the tech giants.
CTG will continue to monitor the development of the legislation so that there are no unintended consequences for charities, but do not envisage that there will be. Longer term, some of the social media firms hit by the tax could feasibly pass on the costs to customers (through increased advertising costs etc), but that will be a commercial decision on their part.