Facebook was yesterday accused of a PR stunt as it emerged that changes it said would make its tax affairs more transparent could see it escape without paying a penny in UK corporation tax for years.
In a shake-up to tackle public criticism the social network said it will route advertising sales for its largest UK customers through Britain instead of Ireland.
The move was welcomed as a sign the company would start paying millions of pounds more tax in this country where Facebook UK paid just £4,327 in corporation tax in 2014.
Facebook was yesterday accused of a PR stunt as it emerged that changes it said would make its tax affairs more transparent could see it escape without paying a penny in UK corporation tax for years
However, the Daily Mail can disclose that the shake-up could actually reduce Facebook’s UK tax bill to nothing – potentially for years to come.
The UK company will finally be able to use more than £10million of losses stored up on its books to offset UK profits. If its tax losses are bigger than its taxable profits, it will not pay any corporation tax at all.
Richard Murphy, an economist and director of Tax Research UK, said: ‘It is entirely possible they are running circles around UK authorities, knowing they will end up paying next to nothing – or nothing at all.’
Jolyon Maugham, a tax barrister at Devereux Chambers, added: ‘It is perfectly possible that Facebook UK won’t be paying any more corporation tax for a number of years.’ He added that the supposed shake up was a ‘clever PR exercise’.
Labour grandee Dame Margaret Hodge, former chairman of the Commons public accounts committee, said it might be ‘a small step in the right direction’ but there were so many unanswered questions it was hard to tell if Facebook was paying a proper amount of tax.
She said a legal loophole allowing corporations to route profits to tax havens via Ireland is due to be closed in 2019, ‘so actually all they’re doing is pre-empting that, bringing it forward for a bit of a PR stunt’.
The move by Facebook comes weeks after Google settled its UK tax bill for £130million. Critics argued that the figure should have been vastly higher.
Facebook acknowledged that Chancellor George Osborne’s decision to impose a 25 per cent tax on profits artificially diverted to other countries had been a factor in its shake-up.
The company said it could not predict how much money it will make, but insisted the changes were designed to make things more ‘transparent’.
The UK branch of the social network has routinely channelled its advertising sales through Ireland – which taxes companies 12.5 per cent of their profits compared to 20 per cent in Britain. Facebook Ireland paid 3.4million euros (£2.6million) in corporation tax last year despite 4.83billion euros (£3.74billion) of revenues.
From April 1, any ad sales made directly by the UK team to big clients such as Tesco and Sainsbury will count as UK transactions. Smaller clients buying through an automated system will still have purchases channelled through Ireland.
HMRC said it ‘ensures that all multinationals pay the tax due under UK law’.
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