UK flags ‘game changer’ tax shift for technology giants

UK chancellor Philip Hammond has promised to clamp down on digital companies' approach to tax with a series of measures that tax experts have described as a "game changer" for the technology giants.

Mr Hammond said while announcing this year’s UK budget that royalties relating to UK sales from digital businesses that are paid to low-tax jurisdictions will be subject to UK income tax from 2019.

This is likely to be closely watched in Ireland.

The chancellor said the rule change, which is expected to generate £200 million (€226 million) a year, would not “solve the problem” of technology companies aggressively minimising their tax bills, but that would it “send a signal of our determination” to clamp down on avoidance.

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‘Wider concern’

“There’s a wider concern…about the tax system in the digital age. Multinational digital businesses pay billions in royalties in jurisdictions where they are not taxed,” he said.

A UK tax lawyer, speaking on condition of anonymity, said the new tax rule would be a “game changer” for large technology companies.

Richard Murphy, a tax campaigner, said on Twitter that it was a "good move".

Separately Mr Hammond promised to introduce joint liability for value added tax on online sales platforms such as Amazon and eBay, which have been criticised for failing to prevent VAT fraud by sellers on their platforms.

– Copyright The Financial Times Limited 2017