Facebook's founder and CEO Mark Zuckerberg at a recent event. The social network giant did not pay UK corporation tax in 2012 (Photo: Reuters)
Facebook's founder and CEO Mark Zuckerberg at a recent event. The social network giant did not pay UK corporation tax in 2012 (Photo: Reuters)

Facebook did not pay any UK corporation tax last year even though its British operation took a large slice of the digital advertising market and reported a 70% increase in income from the previous year.

According to accounts filed at Companies House, the social networking giant's already meagre £238,000 (€282,205, $381,801) UK tax bill for 2011 fell to £0 the following year, despite raking in an eMarketer-estimated £223m in digital advertising.

The latest figures show that Facebook has only paid £1m in UK corporation tax since 2007 on the half a billion pounds of revenue it has made in Britain.

"Facebook pays all taxes required by UK law and we comply with tax laws in all countries where we operate and have employees and offices," said a Facebook spokesman in a press statement.

"We take our tax obligations seriously, and work closely with national tax authorities around the world to ensure compliance with local law."

According to the social network's accounts, Facebook UK made a pre-tax loss of £2.4m on turnover of £34.6m.

The loss was generated from £6m worth of share options granted to employees before Facebook's IPO. The pre-tax loss also accounted for losses carried forward from 2011.

However, Facebook may be able to avoid paying UK corporation tax for many years to come as it still has £11.8m worth of unrecognised tax losses to carry forward.

Mass UK Company Tax Avoidance

The world's largest companies use a variety of tax havens, loopholes and schemes to legally avoid paying billions in UK corporation tax.

According to charity Action Aid's Tax Haven Tracker, 98% of the UK's biggest businesses are using tax havens in order to minimise how much they pay to the government.

Tech giant Google has also come under fire for the small amount of UK corporation tax it pays despite making billions of dollars in global profits.

In 2011, Google only paid £6m in corporation tax despite recording annual revenues of £2.5bn in Britain that year.

From 2006 to 2011, Google generated £11.8bn in UK revenues.

Google's vice-president for sales and operations in northern and central Europe, Matt Brittin, said that nearly all companies spending money on advertising with the technology giant have no contact with its UK branch when closing a deal.

Referring to his previous appearance before the Public Accounts Committee (Pac), Brittin said that "everything I said back in November is true. Literally 99% of the companies paying for advertising with Google do not have contact with the UK.

"No money changes hands in the UK. Firstly, the rights to what we sell and are sold are owned by Google in Ireland, under intellectual property rights.

"We are talking about buying advertising on a platform created in the US. In the UK, we cannot sell what we don't own, we cannot agree a price, we cannot agree on volume discount and we can't close a deal from Britain."