Facebook Tax Row Continues After 11 Million Pound Tax Credit

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May 23rd 2022
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Facebook Tax Row Continues After 11 Million Pound Tax Credit

The company attempted to satisfy diverted tax rules but has now posted a loss on 259m GBP of sales.

We previously detailed how Facebook used its overseas bases to shift profits made on UK operations. Following the introduction of the diverted profits tax in April 2015 the company vowed to keep profits in the UK and pay the relevant taxes. However it has now emerged that a substantial loss was posted for the 2015 tax period.

The firm made global profits of 3.7 billion USD on 18 billion of revenue last year, with 259 million USD of sales attributed to the UK. The company used this to provide its 682 UK staff with an average of £220k in pay and bonuses. By doing so it ran the company to a loss of £52 million after the share rewards for staff. UK corporation tax of £4 million was paid but the loss attributed to the bonuses will be carried forward allowing Facebook to claim a £11 million tax credit against future tax bills.

The diverted profits tax charges 25 percent on profits thought to be from UK activity but transferred to other territories. The rate is 5 percent higher than that of charged on normally declared profits via corporation tax thus levied as a penalty for attempted evasion. It could be applied to profits made by companies after April 1st 2015.

Companies such as eBay, Google and Facebook have been accused of diverting profits by funneling the charges they make through overseas bases and therefore avoiding UK tax and paying tax in a territory where tax is levied at a lower rate.

It will be interesting to see if any of these companies is investigated under the new rules once figures are published for the profits against turnover from UK operations.

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