Recommendation 16

HMRC’s compliance work on 2020–21 payments of the Digital Services Tax was ongoing when we took evidence in December 2022.50 This has proved a much larger task than anticipated, as the number of business groups within the scope of the tax requiring review has grown to 101, covering 216 online services. HMRC was still engaged with 46 groups covering 104 online services as of September 2022.51 HMRC told us that it pursues a resource-intensive one-to-one relationship with the businesses that provide the large majority of tax receipts, which involves approving the methodology used by businesses for allocation of taxable revenues to the UK.52 Setting a high threshold for businesses to qualify for paying a tax is a lesson that HM Treasury is applying to other taxes. It allows focus on a smaller number of large payers while sparing smaller businesses from the administrative burden.53