Tax restructuring at Facebook means the company is due to pay millions of pounds in tax in 2017. The social network famously paid just £4,327 in corporation tax in 2014, but this bill is about to get much larger as advertising revenue is set to be routed through the UK rather than the tax haven of Ireland. A wide-scaled restructuring means advertising sales will now be booked in Britain and subject to UK tax.
Tech companies such as Amazon, eBay and Google have been criticized for their use of tax avoidance schemes, although Google recently agreed to pay back £130 million in tax. Not everyone was happy with Google's 'sweetheart' deal and there has been increased pressure on other companies to pay their fair share.
Facebook's restructuring will take place in April this year -- the start of the tax year. This means that the company's first larger tax bill will be issued in 2017, and it's set to run into the millions. The restructuring is not quite as extensive as some people might have hoped.
While the advertising sales for Facebook's larger clients will be routed through the UK. The company's international headquarters will remain in Ireland, and this will handle smaller advertising contracts.
An internal Facebook document seen by the BBC says:
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.