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Facebook to pay millions more in UK tax Facebook to pay millions more in UK tax
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Facebook is expected to pay millions of pounds more in UK tax after approving fundamental changes to its corporate structure in Europe. Facebook will pay millions of pounds more in UK tax after approving fundamental changes to its corporate structure in Europe.
The social media giant will change its policy so that revenue generated from large advertisers displaying content on Facebook will be routed through the UK rather than Ireland, generating higher taxable revenues in Britain. Starting in April, the world’s largest social network will change its policy so that revenue generated from its largest advertisers displaying content on Facebook will be routed through the UK rather than Ireland. The change will generate higher taxable revenues in Britain and forms part of the US company’s plan to mitigate heavy criticism of tax avoidance.
An internal Facebook document said: “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. Facebook said in a statement: “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.”
“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 company said that the move had been planned for some time, kicking off in earnest in the middle of last year. Where Facebook UK deals with advertisers directly “adding value” to the transaction, advising companies and planning ads, it will invoice through the UK. Facebook’s largest advertising customers in Britain include Tesco and Sainsbury’s as well as major advertising buyer WWP.
“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.” Smaller businesses that use the social network’s online ad buying tools will still be invoiced through Facebook Ireland, which will remain the company’s international headquarters handling all business outside of North America.
The change is expected to see Facebook UK generate significantly higher revenues and therefore pay a higher level of corporation tax, which is levied at 20%. The change will come in to play at the start of April, meaning its first increased bill will arrive next year.
The UK represents less than 10% of Facebook’s global revenue, but the company reiterated that its operations in the country, which include over 850 staff, remained an important part of the business. The company is currently building a new headquarters in London, while the UK contributes to some of its most ambitious projects, including its solar-powered drone development.
Facebook said: “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.”
The social network faced stiff criticism after it was revealed the company paid just £4,327 in corporation tax in 2014, despite its UK staff taking home an average of £210,000 in the same period, receiving more than £35m in a share bonus scheme and pushing Facebook UK into an accounting loss of £28.5m.
The social network has just under 1.6 billion monthly active users, with over 83% of its user base outside the US and Canada, including the UK. According to data from Emarketer, Facebook’s UK users number at approximately 32 million.
Fellow US company Google has also faced stiff criticism over its tax arrangements. It agreed to pay £130m in back taxes in January, but the figure included a quarter of the sum related to Google’s company share options scheme.
Meanwhile Facebook and others have come under fire for suspected data protection law violations across Europe, most recently in Germany where the Federal Cartel Office launched an investigation into suspicions of abuse of market share and the national privacy law.