Facebook to pay millions more in UK tax

London: Facebook, which used to pay just a few thousand pounds in tax in Britain, has been forced to cough up millions of pounds more after the social networking giant agreed to stop routing its UK sales through Ireland that allowed it to keep its tax bill extremely low.
From April this year, the Silicon Valley headquartered firm will restructure its tax policy so that revenue generated from its largest advertisers displaying content on Facebook will be routed through the UK rather than Ireland.
The change, which will generate higher taxable profits in Britain, follows accusations that the US firm was paying far too little tax in the country.
Facebook paid just 4,327 pounds ($6,116) in corporation tax in 2014 in Britain.
"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 an internal post seen by the BBC.
"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," the statement added.
Smaller business sales where advertising is booked online, with little or no Facebook staff intervention, will still be routed through Ireland, which will remain the company's international headquarters.
Corporation tax is levied at 20 per cent in the UK on the profits a business makes.
As the latest changes will be put in place from April, Facebook's first higher tax bill will be paid in 2017.
At this stage, it is not clear how much tax Facebook will pay as it is not under regulatory obligation to reveal the size of its UK business until it reaches 10 per cent of its global operations, which generate revenues of nearly $18 billion a year.
But the UK is an important market for Facebook, where it employs 850 people and is also building a new headquarters in London.
Before the new structure, Facebook's UK revenues were based on a fee payment from Facebook Ireland, which meant that its actual sales here did not affect its tax bill.