Facebook agrees to pay millions more in UK tax following criticism of Ireland arrangement

Changes to how the social network channels its advertising profit will generate huge income for HMRC

Lizzie Dearden
Friday 04 March 2016 10:03
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Facebook is expected to pay millions of pounds in tax to the British Government after years of criticism over its arrangements.

Income from some of its largest advertisers will now be taxed in the UK after the company stops routing profits through Ireland.

The revenue will then be subject to corporation tax, of which Facebook paid just £4,327 in 2014 despite an annual profit of £1.9 billion.

UK growing calls for multinational companies to pay more taxes

Changes will be put in place in April, with the first new tax bill to be paid in 2017.

It was revealed yesterday that HMRC pays Facebook six times the amount the company pays in tax to buy adverts telling people to pay their taxes.

A Freedom of Information request by Channel 4 News revealed the company was paid £27,000 by HM Revenue and Customs (HMRC) last year.

“Like all large organisations we find that an increasing number of those we serve communicate through and get their information from social media," a spokesperson for HMRC said.

"Our investment in social media is carefully evaluated to ensure we are getting maximum value for the taxpayer."

A spokesperson for Facebook told The Independent the changes announced on Friday aimed to increase “transparency” and fall in line with tax changes made by the current Government.

“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,” she added.

“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.”

Facebook previously routed profits through its Dublin office.

The company has large offices in Dublin and London, where a new HQ is being built to house around 850 staff.

Its Irish base employs almost 1,000 people from 50 countries working in departments IT, engineering, finance, sales and marketing.

Facebook is just one of a long line of multinational firms to be criticised over the size of their UK tax bills, with Google, Starbucks and Amazon also coming under fire.

The Chancellor, George Osborne, pledged to crackdown on tax avoidance by introducing a "diverted profits tax" to penalise companies that move their profits outside of the UK to countries with lower corporation tax rates in order to pay less to the Treasury.

The penalty, nicknamed the "Google Tax", came into effect in April last year.

HMRC has not yet responded to The Independent's request for a comment.

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