starekase - Fotolia
Facebook is reportedly ushering in changes that could see the social networking giant cough up more UK corporation tax than ever before.
According to a BBC report, the company has previously avoided paying tax on the profits generated through the adverts it sells to large British companies by getting staff at its Irish HQ to book the sales.
The change means the profits and revenue accrued through British ad sales will be attributed to Facebook UK, rather than Facebook Ireland – the location of its international headquarters.
Smaller advertising deals that are processed online with little human interaction will continue to be processed via Ireland.
According to an internal memo seen by the BBC, Facebook’s customers will be notified about the changes from early next week, and they are expected to come into force in April.
“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,” the document states.
“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.”
It goes on to say that the changes are being introduced to bring greater transparency around how Facebook operates 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 memo continues.
Read more about tech firms and tax
- Google has agreed to pay £130m in back taxes to the UK government after insisting for years that it was fully compliant with UK tax laws.
- The government is expected to introduce new methods to prevent suppliers from minimising their UK tax bills, which could see some lose out on multi-billion-pound contracts.
The company’s tax affairs have come under close scrutiny in recent months after Companies House documents revealed in October 2015 that the firm paid just £4,327 in corporation tax during the previous year.
Facebook is one of several US-based tech firms to have come under fire for how it handles its tax affairs. Both Amazon.com and Google’s track records in this area have also attracted unfavourable attention.
In January, Google agreed to pay £130m in back taxes to the UK government, having previously employed an Ireland-based ad sales booking scheme similar to that of Facebook.
However, the search giant has repeatedly denied any wrongdoing and has stressed that its decision to pay up should not be seen as an admission of guilt for tax avoidance.