Facebook is to pay millions more in UK tax after overhauling its structure, after it was revealed that the social network paid just £4,327 in corporation tax for an entire year.
Under new arrangements, the majority of its advertising revenue initiated in Britain will now be taxed in the UK.
It means sales will no longer be routed through Ireland for its largest advertisers though revenues from smaller business sales still will.
Facebook’s largest UK advertisers include the likes of Tesco, Sainsbury’s, FMCG giant Unilever and advertising giant WPP.
Smaller business sales where advertising is booked online – with little or no Facebook staff intervention – will still be routed through Ireland, which will remain the company’s international headquarters.
The changes should mean a higher corporation tax bill. They are due to come into effect in April so the first tax bill under the new structure will come in 2017.
Facebook 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 comes after search engine Google reached a controversial deal with tax authorities to pay £130m in taxes going back ten years. Critics say the sum is derisory.
Facebook’s 2015 results posted earlier this year showed revenue climbed 44% to $17.93bn (£12.6bn) while net income rose 25% to $3.69bn (£2.59bn).
Founder Mark Zuckerberg was this week name as one of the top ten of the richest people in the world, when Forbes published its annual billionaire’s list.
His net worth was estimated to have climbed by $11.2bn (£8bn) to $44.6bn (£31.9bn) over the last year, propelling him into sixth place.
HM Revenue & Customs said: “We do not comment on individual taxpayers. But HMRC ensures that all multinationals pay the tax due under UK law and we do not settle for a penny less. We will closely examine any business’s structure on behalf of the British public to make absolutely sure they pay all the tax due to the UK.”