If you’ve ever been to London for a tech tour, you will have seen the offices of the likes of Facebook, Google and Amazon, but for tax purposes at least, these companies have long denied they do any real business in the UK.
Well, that might all be about to change, as in what appears to be an unprecedented move, Facebook has revealed that it is changing its corporate structure so that big advertising deals made in the UK will be taxed in the UK.
New York, are you ready?
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Facebook paid just £4,327 of UK tax in 2014 using a complicated arrangement with an Irish subsidiary that enabled it to avoid the local 20 percent corporation tax rate.
It’s not clear yet how much cash this will bring in when the change is made official in the new tax year in April, but the government should see a nice piece of the $1 billion profit Facebook now makes worldwide every quarter.
But this is not an altruistic move to help the hard-up UK government build more roads, schools or hospitals – the company is keen to avoid the new diverted profits tax that would see companies using arrangements like Facebook’s taxed at 25 percent.
This also, surely, begs a question about whether Facebook will be made to pay any additional tax from previous years.
An internal Facebook document seen by the BBC said: “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.
“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.”
It was also probably getting a bit hard to explain what its team in London is actually doing, if not working at Facebook.