Google has been criticised for avoiding paying tax on its £1.6bn UK revenues.
The internet giant's international corporate structure meant it avoided paying up to £450m in corporation tax, according to the Guardian.
The report said none of the search engine's advertising revenue from British customers was accounted for in the UK business, despite operations in London and Manchester incurring administrative expenses of £177m last year, including a wage bill of £70m.
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Google diverts UK tax to its European headquarters in Ireland, which has a favourable corporation tax rate of 10% to 25%. Corporations pay 28% to 30% in the UK.
Deputy leader of the Liberal Democrats, Vince Cable, told The Sunday Times, "Avoidance like this is hard to stomach at the best of times. But when the country is in recession and everyone is feeling the pain, it really sticks in the throat - it means higher taxes for the rest of us.
"Google's reputation will be severely damaged if it continues to behave in this way. It is ducking its social responsibility," Cable added.
Google told the Sunday Times, "Google makes a big investment in the UK, with over 800 employees, and makes a substantial contribution to local and national taxation. But the fact is that our European headquarters is in Dublin. We comply fully with the tax laws in all the countries in which we operate."
Mark Lewis, lawyer at Berwin Leighton Paisner, said companies have the opportunity to minimise their taxes and most do. "In the current economic climate if Google was doing anything wrong the HMRC would come down on it like a ton of bricks."