Twitter could be funnelling much of the sales it generates in Britain through an offshore structure, its newly published annual accounts suggest. Such a structure would be entirely legal but could result in a lesser UK tax bill as sales transactions would take place offshore.
Twitter UK has filed abbreviated 2013 accounts for a small company under Companies House rules, which are usually applicable to a business with an annual turnover of less than £6.5m, or which employs fewer than 50 staff.
Yet the annual report for the ultimate parent company Twitter Inc, published earlier this year, disclosed for the first time the scale of its operation in the UK where it reported sales of $66.5m (£40.5m).
If Twitter UK's turnover is below £6.5million, that might suggest that a large proportion of Twitter’s sales from the UK are processed offshore – most likely in Ireland, where Twitter UK’s immediate parent company is based – which could reduce its UK tax bill.
Twitter UK’s accounts show the company set aside £7.4m as a “share-based payment reserve” for staff and made a profit of £962,000.
No turnover figure was disclosed and there was little other detail.
Twitter declined to comment on the accounts or any sales operation in Ireland. But a source close to the social media giant pointed out that Twitter UK did not necessarily have a turnover of under £6.5m last year. Companies House rules allow abbreviated accounts for a number of reasons, including the size of balance sheet.
It has become common practice for many US technology companies to set up an offshore operation to process international sales and avoid UK corporation tax. Google and Facebook use Ireland and Amazon uses Luxembourg as a central hub. Such a set-up is legal but controversial, with MPs on the Commons Public Accounts Select Committee condemning offshore tax avoidance by multinational companies in a report last year. Google and other tech companies have always said that they comply with all tax rules in the UK.
In a typical offshore sales structure, the London office would act as a marketing arm, persuading customers to buy advertising or other products, but the sales transaction itself is said to take place offshore.
Twitter’s global tax bill is likely to remain low in the short term, because Twitter Inc has been loss-making.
Twitter UK’s accounts said £2.4m in “taxation and social security” are due within one year but gave no other information on tax. The UK is Twitter’s biggest market after America and is responsible for 10 per cent of group sales, largely from advertising.
Research company eMarketer has estimated Twitter’s UK advertising revenues should more than double to £96.8 m in 2014.Reuse content