Earlier this month, the UK Government have a number of upcoming meetings to discuss The Taxes (Interest Rate) (Amendment No. 2) Regulations 2020, which will enable the HMRC to collect or pay interest on overpaid or underpaid digital services tax liabilities.
The UK introduced its DST on April 1st, 2020, at a rate of 2%. It applies to revenue generated by search engines, social media platforms, and online marketplaces, to revenues from those activities that are linked to the participation of UK users. It applies only to groups that generate global revenue from in-scope business activities in excess of GBP 500m per year. Companies will not have to pay tax on the first GBP 25m of revenue.
The new Regulations, which are expected to enter into force next month in October, provide for the following rates of interest on overpaid or unpaid DST:
• The rate of interest will be the reference rate less 0.25%, or 0.5% if greater, for DST paid before the required due date.
• The rate of interest will be the reference rate less 1%, or 0.5 % if greater, for overpaid DST.
• The rate of interest will be the reference rate plus 2.5%, for underpayments of DST liability.
For all scenarios, the reference rate is the official bank rate as determined by the most recent meeting of the Monetary Policy Committee of the Bank of England.