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10 Oct 2016 03:00pm

Facebook enjoys £11.3m UK tax credit

Facebook has come under fire once again after the multinational’s UK arm reported ending 2015 with a £11.3m tax credit, after pledging to pay more UK taxes earlier this year

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Caption: Facebook used a deferred tax credit to offset its tax bill

Despite reporting a £4.16m UK corporation tax bill for 2015, up from £4,327 in 2014, Facebook UK’s accounts show that the company ended 2015 in credit.

The company was able to use a £15.5m deferred tax credit, linked to its bonus scheme, to offset its £4.16m tax bill, meaning Facebook UK ended the year with a tax credit of £11.3m, which can be carried over to next year to offset future tax bills.

While turnover at Facebook UK increased to £210.7m in 2015, up from £104.9m, the company accounts showed losses before tax also increased from £28.46m in 2014 to £52.49m in 2015.

If the profession will not act to reform this then a government committed to tackling tax abuse should

Richard Murphy of Tax Research UK

Losses after tax increased from £28.5m in 2014 to £41.17m in 2015 due to an increase in the share-based staff bonus scheme from £35.4m in 2014 to £71m in 2015.

Facebook announced in March that it would be paying significantly more in UK tax after criticism over the company’s miniscule 2014 tax bill forced the company to announce it would no longer route UK advertising sales through Ireland where corporation tax rates are lower.

However, the results of these changes will not be seen until Facebook’s 2016 financial report is published.

The company’s 2015 account disclosures have raised more questions about the amount of tax paid by the tech giant and other multinationals operating in the UK.

A spokesperson for Facebook said, “We are proud that in 2015 we have continued to grow our business in the UK and created over 300 new high skilled jobs.

"The UK is now home to some of the most innovative technologies in the world including our investment in a high tech solar powered plane centre in Somerset that will help bring the internet to remote areas of the world. We pay all the taxes that we are required to under UK law.”

However, Richard Murphy of Tax Research UK raised concerns over the considerable amount of information omitted from Facebook UK’s accounts.

“What the Facebook UK accounts provide are a limited view of that organisation's costs in the UK, but tell very little at all about its revenues.

“The statements it makes on why it will not disclose its revenues are dichotomous, at best. The information on the trading of this company and the real risks within it are scant,” he added.

“Worse, given that tax is known to be the focus of concern for this company we are left guessing as to many issues relating to its tax because of a lack of disclosure.

Murphy complained that UK accounting standards, which he said are essentially set by the auditing profession for the convenience of its clients “permit all this to happen”.

“The result is that we have a conspiracy of opacity when the virtue of transparency is required,” he added.

“If the profession will not act to reform this then a government committed to tackling tax abuse should.”

Prime minister Theresa May issued a warning to international companies who “treat tax laws as an optional extra” saying “this can’t go on any more”.

Anders Dahlbeck, ActionAid tax justice policy adviser, added, “The uproar over reports of Facebook’s tax affairs once again demonstrates public unhappiness at large companies appearing to avoid paying their fair share of tax.

“The UK government must champion a fairer global tax system which tackles tax avoidance, supports women and children and helps developing countries to find a sustainable route out of poverty. The prime minister could take immediate action by compelling UK companies to publicly reveal the tax they pay in every country where they operate, including in tax havens," he said.

A spokesperson for HMRC said, “HMRC is clear that multinational companies must pay the tax that is due and we do not settle for less - everyone must play by the same rules.

“Through our robust enforcement of the rules last year we brought in a record £26bn in extra tax for public services, with £7.3bn coming from the 2,000 largest and most complex businesses in the UK.

“The government has led the way in taking action to close loopholes and ensure multinational companies pay their fair and legal share of tax. Through new rules like the Diverted Profits Tax we can hit businesses with a higher tax rate on profits they attempt to shift offshore to avoid UK tax.

"The UK also played a leading role in the OECD project to strengthen international tax standards to counter tax dodging profit-shifting.”

Sinead Moore

 

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