Facebook to pay millions more in UK tax as it abandons controversial arrangement
Fri 4 Mar 2016
Facebook is to pay millions of pounds more in UK tax after years of controversial arrangements which saw the social network divert its profits through Ireland.
A change in structure followed criticism that the company had paid just £4,327 in British tax in 2014, while channelling most of its sales to Ireland, which has a lower corporation tax rate. In the same year it had made $2.9 billion (approx. £2 billion) profit worldwide.
Now, from April this year, Facebook will book its sales from its biggest British advertisers in the UK, which means that it will pay more tax from 2017.
According to reports, Facebook’s UK advertising sales topped at around £800 million last year. While the social media giant will still not record all of its UK ad revenue in the UK, the latest move will ensure that a higher rate will be paid for revenue and profits.
In a statement circulated internally, Facebook explained: ‘On Monday, we will start notifying large UK customers that from the start of April, they will receive invoices from Facebook UK and not Facebook Ireland.
‘What this means in practice is that UK sales made directly by our UK team will be booked in the UK, not Ireland. Facebook UK will then record the revenue from these sales. In light of changes to tax law in the UK, we felt this change would provide transparency to Facebook’s operations in the UK.
‘The new structure is easier to understand and clearly recognises the value our UK organisation adds to our sales through our highly skilled and growing UK sales team.’
The restructure comes after Google’s announcement that it would be taxed £130 million in back payments by HM Revenue and Customs (HMRC). The settlement was highly criticised, with many arguing that it constituted a sweetheart deal between the government and Google.