Facebook will be liable for millions of pounds more in UK tax following major changes to the company's tax structure. In response to widespread criticism regarding its use of tax avoidance tactics, the social media giant will no longer route sales for its major business clients through Ireland.
The BBC reports that Facebook has made the changes following growing pressure to overhaul the way it conducts business in the UK where, despite the country being one of its biggest markets outside of the US, the company pays only a fractional amount of tax.
In 2014 for example, Facebook paid just £4,327 in corporation tax in the UK. By comparison the average tax bill for its UK employees was £5,392. The group's 2014 annual profit was $2.9bn (£2bn). Facebook is one of several multinational companies to have come under criticism for routing money through other countries in order to pay less taxes in the UK, with Google also having found itself in the firing line.
The move by Facebook comes in light of the UK government's diverted profits tax – otherwise known as the Google tax – which was introduced in April 2015 as a means of targeting companies with a 25% tax rate if they were found to moving profits off-sea.
From April 2016 sales from Facebook's largest advertisers including Tesco, Sainsbury's and Unilever will no longer be routed through Ireland and the company will pay its new, higher tax bill in 2017, the BBC said. Small business sales, however, will still go through the company's headquarters in Ireland.
A Facebook spokesperson 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."