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Investigation into the Digital Services Tax

The Digital Services Tax has raised more revenue than forecast by the Government and increased the amount of UK tax paid by big digital companies. HMRC’s compliance work is ongoing and it has yet to identify any non-compliance among business groups, according to a report by the National Audit Office.

Published: 23 Nov 2022 Recommendations: 4 Type: Value for Money NAO confirmed: 4 Department: HM Revenue and Customs
Dept: HM Revenue and Customs Topics: Business and industryDigital servicesDigital, data and technologyMoney and taxTax and revenue nao.org.uk →

Recommendations

4 items
4 accepted 4 implemented

Recommendation 1

Addressee: HM Revenue and Customs · Source location: Page 10, 18

a) HMRC should set out criteria to ensure its teams are able to consistently identify all business
groups, companies and sources of revenue that are in scope for the Digital
Services Tax. This could include updating guidance to DST Compliance teams
to specify when, or in what circumstances, they should:
? escalate a case to additional levels of scrutiny; and
? triangulate data supporting an individual group?s tax return with other
information, including the group?s contracts with other companies,
management information and (where necessary) the group?s data on UK
internet traffic to help understand completeness, and potentially identify
additional revenue streams within groups

Response position: Accepted

Delivery: Implemented · 06/2023 · Confirmed by NAO

Recommendation 2

Addressee: HM Revenue and Customs · Source location: Page 10, 18

b) HMRC should estimate the potential tax gap for DST (the difference between total theoretical
tax liabilities and the amount that has been paid) separate from any HMRC
calculation of the overall tax gap. For example, by comparing total revenue
with macro-economic data since the COVID-19 pandemic began and data
on business sectors not initially expected to be in scope for DST

Response position: Accepted

Delivery: Implemented · Summer 2023 · Confirmed by NAO

Recommendation 3

Addressee: HM Revenue and Customs · Source location: Page 10, 18

c) HMRC should develop and implement a plan to identify, and raise awareness among, business
groups that are unaware they may be liable for the UK DST, particularly those
without a physical presence in the UK

Response position: Accepted

Delivery: Implemented · Summer 2023 · Confirmed by NAO

Recommendation 4

Addressee: HM Revenue and Customs · Source location: Page 10, 18

d) HMRC should develop a contingency plan for enforcement against business groups that
do not have a physical presence in the UK and fail to engage with HMRC,
after exploring the available options. This could include discussions with tax
authorities in other countries that operate a digital services tax and have
similar interests, to ensure there is a clear pathway for enforcement

Response position: Accepted

Delivery: Implemented · Summer 2023 · Confirmed by NAO

Public Accounts Committee follow-up

1 report

The Public Accounts Committee examined this NAO report and published its own recommendations. The government responds to PAC recommendations via Treasury Minutes.