Following the approval of fundamental changes to its corporation structure, the world’s largest social network is now set to pay millions of pounds more in UK tax. As of April, the social media giant is will change its policy regarding the revenue generated from some of its largest advertisers which is planned to be routed through the UK, rather than Ireland. By embarking on this step, the company’s plan is to generate higher taxable profits in the UK and to mitigate previous tax avoidance criticism. As a result, the revenue will be subject to corporation tax, levied at 20%, the first payment of which is expected to be made in 2017. Facebook has paid only £4,327 in corporation tax despite its £1.9 billion annual profit in 2014 and the fact that Britain is one of Facebook’s biggest markets outside the US. Although Ireland will remain Facebook’s international headquarters dealing with all businesses outside of North America, the corporation is currently in the process of building a new UK headquarters in London.
“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”, said Facebook.
Up until now, the UK revenues of Facebook have been based on a fee payment coming from the company’s office in Ireland, resulting in the actual sales made in the UK haven’t been affecting the tax bills. Google UK, being paid for its operations in the UK by its US parent, has a similar structure and has also been facing controversy in relation to the taxes that the corporation pays. Facebook claims that this move has been planned “for some time” and has not been triggered by the Google settlement involving the giant paying £130 million in back taxes to Britain. The social network has neither confirmed nor declined speculation that the company is also the subject of an inquiry by Her Majesty’s Revenue and Customs (HMRC) regarding its tax structure.
Facebook executives will be notified that from the start of April their invoices will be coming from Facebook UK instead of Facebook Ireland.