TAXING THE DIGITAL ECONOMY

By Gemma Brindley,

The UK is set to introduce its own digital services tax (DST) from April 2020. The announcement was confirmed last July when the UK Government published its Finance Bill 2019-20.

July was also when President Macron signed the French DST legislation, with the new tax backdated to 1 January, 2019.

However, the French government has now announced that it will not implement its proposals for a DST until the end of the year at the earliest.

With the new Chancellor Rishi Sunak’s Budget set to take place this month, many will be waiting to see how DST is addressed from a UK perspective.

How to tax the digital economy has been a somewhat contentious subject for all countries across the globe.

All governments are agreed on the need to address this area, but controversy comes into play as it risks upsetting the US president during an election year and at a time when the UK is seeking advantageous trade terms with the US.

With an eye on pending US-UK trade negotiations, the US has objected to the introduction of a UK DST, but before the previous chancellor resigned, the Treasury had confirmed its commitment to the introduction of the tax from April 2020, saying it would be repealed when a global solution is in place.

The new UK legislation introduces a DST of two per cent on digital services revenues that are derived from social media platforms, running search engines and online marketplaces like Amazon –it does not simply mean anything sold on the internet. Financial and payment services are exempt.

Although the thresholds where DST is applied are high – groups with global digital services revenues of more than £500 million and UK digital services revenues of more than £25 million – it will still encompass many successful brands with a UK and global reach.

Online marketplace transactions will be considered to involve UK users if at least one of the parties is UK-based, but if one of the parties is based in another country with a similar tax to DST, the tax charged will be reduced by 50 per cent. www.crowe.co.uk

If an advert is intended for a UK audience, then the advertising revenue produced will be judged to have come from UK users.

That, in essence, is how DST is intended to operate, but with only a few weeks to April 1, 2020 we are still notably short on detail.

We do know that the legislation will not provide a particularly significant contribution to the UK economy.

It is projected to raise £275 million in its first year, rising to £370 million thereafter. To put this into context UK tax receipts amounted to approximately £623.4 billion in 2018-19.

For now, we await the Budget.Crowe will be following any developments closely and we are well-placed to discuss and advise on the potential impact of a future DST on your business.

Blake Morgan Oversees Reading Council Leisure Deal

Oxford law firm Blake Morgan advised Reading Council in its appointment of Greenwich Leisure Ltd as the preferred bidder to design, build, operate and maintain Reading’s leisure service. The contract, which will last 25 years, comes as part of the council’s commitment to invest more than £40 million in new and existing facilities across Reading, including two major swimming facilities at Palmer Park and Rivermead, as well as upgrades to existing services.

Midlands law firm helps UK charity in major national property deal

“I am delighted to announce GLL as our successful leisure partner, who – working closely with the Council – will transform leisure facilities in Reading” for Sport, said: “I am delighted to announce GLL as our successful leisure partner, who – working closely with the council – will transform leisure facilities in Reading.”

Penny Rinta-Suksi, Partner and Head of Local Government England at Blake Morgan, said: “The new design, build, operate and maintain contract we’ve worked with Reading Council to develop will safeguard the council’s investments and allow them to deliver best-in-class new facilities and operate them successfully long into the future.”

BPE acts for HiETA Technologies in investment deal

Cheltenham-based law firm BPE Solicitors has acted for HiETA Technologies Limited on a significant investment from Meggitt (UK) Ltd.

HiETA Technologies has been providing the automotive, aerospace, defence, energy and motor-sports industries with products and services using additive manufacturing techniques since 2011.

Meggitt (UK) Ltd is a subsidiary of Meggitt, a global business specialising in advanced products and technology for the aviation, defence and energy sectors.

The investment from Meggitt will enable HiETA Technologies to accelerate the development of the next line of thermal technology systems.

These systems are key for HiETA as they will enable the continued development of sustainable aviation and low carbon power generation.

HiETA Technologies’ CEO and co-founder, Mike Adams said: “We are delighted to have secured the investment from a leading international company in high performance components and subsystems for the aerospace, defence and selected energy markets, bringing us an incredible wealth of experience.”

A Midlands law firm has helped a UK charity in a major national property deal that will mean it can reach more disabled people with vital services.

Wright Hassall, based in Leamington Spa, acted for charity Leonard Cheshire in the sale of 17 care homes to care provider Valorum Care Group which will now run them.

The deal will allow Leonard Cheshire, which provides services and support for people living with disabilities, to expand its services in the community and to support more individuals with disabilities.

Leonard Cheshire has around 130 services across the UK, 5,000 staff and 8,500 volunteers. Founded in 1948, last year it reached more than 46,000 people through its work in the UK and internationally.

Wright Hassall acted for Leonard Cheshire on the sale of the real estate while Linklaters LLP of London advised Leonard Cheshire on the business sale.

Gill Worthington, Partner at Wright Hassall said: “This sale is a really important development for Leonard Cheshire enabling them to grow their services, extend their reach and continue to provide quality care for people with disabilities and long-term health conditions.”

Hugh Fenn, Leonard Cheshire’s Executive Director of UK Care Service, added: “The sale will result in the kind of investment at the services that we as a charity could not justify. Funds raised from the sale will be invested by Leonard Cheshire to increase the difference we make to disabled people’s lives and widen the range of support we offer in communities across the UK.”