Netflix paid no corporation tax in the UK last year, despite estimated revenues of £200m in this country alone. The online movie streaming service has 5m paying subscribers in Britain, but according to a Sunday Times investigation, it was based in Luxembourg allowing it to pay a lower rate of tax until the end of 2014.
Subscribers pay between £5.99-£8.99 per month to access films and TV shows on demand. Popular series like Breaking Bad and The Killing have proved popular with UK viewers, while the company has also produced a number of properties of its own, including House of Cards, Orange is the New Black, and Daredevil.
Although Britain is Netflix's biggest European market, the company's European arm, Netflix International VB, is headquartered in the Netherlands and employs around 50 people. There is no suggestion of any legal wrongdoing, as subscriptions are booked overseas, and no UK tax is paid on revenues from Britain.
Losses from expansion
The latest accounts for Netflix International BV, according to the Sunday Times, show a net turnover of £415m and profits of £11.3m in 2014, with British customers accounting for the largest proportion of turnover. It says the company paid income tax in Luxembourg of £573,396, equivalent to a rate of about 5%.
A spokesperson for the company told the paper that Netflix was in expansion mode, so was making overall losses throughout its international operation.
He added that Netflix' British subsidiary, Netflix Services UK, employs about 12 people and will pay some corporation tax this year, adding: "We are fully compliant with all applicable rules."
The EU has now brought in new rules to help close tax loopholes for multinationals, meaning Netflix, which also benefitted from Luxembourg's lower VAT rates, is now paying VAT in the UK, with a bill expected to reach around £70m this year.
Netflix has global revenues of $5.5bn, and is only the latest in a line of multinationals revealed to be paying next to no corporation tax in the UK. In October, Facebook was found to have paid just £4,327 in corporation tax after making a pre-tax loss of £28.5m.