Facebook(FB) will pay a lot more tax in the U.K. after changing its tax structure to book more ad revenue coming from the country in the U.K. itself, rather than diverting it through Ireland as it did before.
The previous structure meant Facebook paid a paltry £4,327 ($6,120) in U.K corporation tax for 2014 — much less, in fact, than the tax authority itself paid for advertising on Facebook. Now, according to reports in the Financial Times and BBC, the company is expected to pay millions each year.
An internal Facebook staff memo cited recent changes to U.K. tax law. This would be the diverted profits tax that came in last year, levying a 25% tax on profits that the authorities think have been artificially diverted from the country.
The U.K.’s corporation tax rate is lower, at 20%.
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“The new structure is easier to understand and clearly recognizes the value our U.K. organisation adds to our sales through our highly skilled and growing U.K. sales team,” memo read, as reported in the FT.
Facebook’s first increased tax bill will only be paid in 2017, and the changes will only apply to the biggest advertisers, such as supermarket giants Tesco and Sainsbury’s, ad firm WPP, and Unilever.
As for smaller businesses that book their advertising through Facebook’s automated systems, those will still go through Ireland as before.
Google(GOOG) recently cut a deal with the U.K. tax authorities to pay around $190 million in taxes on sales it had booked through Ireland over the last decade, although that deal was branded as derisory.