Following intense pressure from the UK government, Facebook’s operations in the country is to stop routing its biggest advertising clients through Ireland, therefore keeping millions of pounds within the UK’s coffers.
As many familiar with the tech companies based in Ireland will know, companies like Google and Facebook often technically makes sales for advertising through their UK offices, but, often, all the financial dealings are routed through Ireland to take advantage of our more favourable corporate tax rate.
Now, however, for Facebook at least, this practice appears to be getting scaled back considerably, with many of its major clients now being required to pay rates of tax that are compliant with UK government rules.
According to the BBC, major Facebook clients like Tesco, Sainsbury’s and Unilever will be included in this grouping of companies that will no longer be processed in Ireland, but many of the smaller advertisers that are processed automatically online will remain under Irish regulation.
The UK’s incoming profits tax is levied at 25pc and, with this decision, Facebook will pay substantially more tax when the new change is brought in next month, with its first big bill set to hit next year.
Coincides with Google decision
In an internal post within Facebook seen by the BBC journalist, Facebook’s UK management said: “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 company was hounded by many politicians and sectors of the press back in 2014 after it was revealed the company only paid just over £4,000 in tax in the UK for the year due to it routing its sales into Ireland.
The decision coincidentally coincides with Google being brought before Britain’s revenue authority – the HMRC – last month after it agreed that it would pay as much as £130m in back taxes it had been judged to owe the UK government.
Union Jack umbrella image via Moyan Brenn/Flickr