Internet giant Google has said it will pay £130 million in back taxes after years of paying a tiny amount of tax in relation to its UK profits.
The news follows a six year inquiry by Her Majesty's Revenue and Customs (HMRC) into tax evasion by multinational companies and after changes in UK and global tax rules.
Matt Brittin, head of Google Europe, told the BBC: “Today we announced that we are going to be paying more tax in the UK.
“The rules are changing internationally and the UK government is taking the lead in applying those rules, so we'll be changing what we are doing here.”
"We want to ensure that we pay the right amount of tax,” he added.
The government has introduced a “Google tax” to ensure big global companies pay their “fair share” in the UK, while the Organisation for Economic Cooperation and Development has said companies should not move profits to low-tax countries
Google and other US companies like Facebook, Amazon and Starbucks have faced criticism for paying so little in UK taxes.
Margaret Hodge MP, then chairwoman of the Parliamentary Public Accounts Committee, has called Google’s tax structures "devious, calculated and, in my view, unethical".
Britain is one of Google’s biggest markets, but its complex tax arrangements has seen it pay very little in tax to the UK Treasury.
Google’s European headquarters are in Ireland where it benefits from the country’s low corporation tax rate.
It also sends its profits through companies in Bermuda where the corporation tax rate is zero.
In 2013 the company paid just £20.4 million in UK taxes – a year in which the value of its sales in Britain was £3.8 billion.
Mr Brittin said: "We are paying £130 million in respect of previous years when the rules were to pay in respect of profits you make in a country and then going forward we will also be paying in respect of sales to UK customers.”
Mr Brittin did not accept that the back payments were an admission that not enough tax was paid before, saying Google’s tax structures were legal under the old rules.
An HMRC spokesman said: "The successful conclusion of HMRC enquiries has secured a substantial result, which means that Google will pay the full tax due in law on profits that belong in the UK.
"Multinational companies must pay the tax that is due and we do not accept less."Reuse content