The new draft Finance Bill will ensure a “competitive and fair tax system”, the Government has said, revealing that a number of new policies will go into effect from April 2020.
The Bill, published last week in draft form, features several controversial new measures, including the Digital Services Tax and off-payroll working rules for private sector employers, also known as ‘IR35’.
The Digital Services Tax comes after the Government committed to crack down on large tech corporations who pay a disproportionate amount of tax in the UK.
Explaining the new policy, the Government said the levy is a targeted and temporary tax that will ensure large digital businesses pay tax that reflects the value derived from their UK customers.
However, it will not apply to small businesses or businesses making losses, it said, adding that the Digital Services Tax will be removed when a global solution is agreed upon.
The Finance Bill will also introduce controversial new off-payroll working rules in the private and third sectors. The rules, which already exist in the public sector, place responsibility on employers for assessing an individual’s employment status and deducting the right tax and National Insurance contributions. Failure to correctly apply the rules will result in hefty penalties.
Commenting on the announcement of the Bill, Jesse Norman, Financial Secretary to the Treasury and Paymaster General, said: “The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate Digital Services Tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement.”
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