UK tax spotlight may fall on Microsoft’s operations in Ireland next

20 Jun 2016

Allegations that Microsoft is routing UK sales through Ireland and saving £100m a year in tax may lead to pressure on the software giant

Software giant Microsoft has been accused of booking UK sales through Ireland, where it has a lower corporate tax rate.

Microsoft, which last week bought social network LinkedIn for $26bn in cash, has major operations in Ireland that extend back to 1985, when it first arrived in Ireland to manufacture software.

It employs 1,200 people in Ireland and is in the midst of constructing a new €134m campus in Leopardstown.

Future Human

A report in the Sunday Times at the weekend alleges that Microsoft managed to avoid €127m (£100m) a year in taxes by booking sales through Ireland.

The report suggests the UK tax authorities have given the arrangement their blessing.

It was claimed in the report that Microsoft sent more than £8bn worth of revenues from sales in the UK through its Irish operations to avail of the lower 12.5pc rate of corporation tax in Ireland which compares to the 20pc rate in the UK.

Putting Microsoft uncomfortably in the spotlight over its tax affairs is reminiscent of the case earlier this year that resulted in Facebook deciding to stop routing its biggest advertising clients through Ireland following pressure from the UK government after it emerged it paid only £4,000 tax in the UK.

Sales booked by the social network’s UK team will no longer be booked in Ireland and Facebook UK will then record the revenue from those sales.

Earlier this year, Google agreed to pay as much as £130m in back taxes it had been judged to owe the UK government.

Microsoft image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years