Facebook’s Tiny Corporation Tax Bill

Facebook Is Not Profitable In The UK

Year after year, we have dealt with countless headlines of massive multimillion companies dodging their UK tax payments and saving millions. Facebook is the latest company in the spotlight; currently, the company pays less tax than the average UK employee.

How Has Facebook Managed To Pay Less Tax?

The social networking giant, who has 1.39 billion active users each month, has raised eyebrows after it was revealed that they paid a mere £4,327 of UK corporation tax in 2014. It goes without mention, the general public is both concerned and outraged that, on average, they pay more tax than a company worth billions of pounds.

The average UK salary is £26,500, of which employees pay a total of £5,392.80 in income tax and national insurance contributions. Meanwhile, in the fourth quarter of 2014 alone, Facebook collected a total of £462m.

How? Well, Facebook reported a £28.5m loss in profits while each UK employee received £210,000 bonus as part of an incentive scheme. This allowed Facebook to claim an accounting loss and pay less tax.

Other Companies Paying Less Corporation Tax

This revelation has reignited the debate on how much corporation tax companies should pay. The European Commission is already investigating many other multinational companies over tax arrangements with EU member states, including Google, Amazon and Starbucks.

The investigation initially began when it was revealed that Starbucks paid £8.6m in UK corporation tax over a 14-year period (1998 to 2002). Approximately £600,000 a year. This was despite the company earning more than £3bn UK sales in the same period of time.

However, as far as we know, Facebook is complying with tax laws. Coincidentally, this has created confusion and anger; why were Facebook’s contributions so low, and how did they get away with it? This has increased pressure on the government to reinforce corporation tax laws for large multinational companies making millions in the UK.

Corporation Tax Laws In The UK

For many, corporations go to great lengths to find loopholes and avoid paying tax, whether it’s by diverting profits out of the UK through tax havens or through shell companies.

To combat this, Chancellor George Osborn introduced a diverted profits tax in April 2015 for companies that move their profits overseas. The 25% levy is more than corporation tax, which is set at 20%. In theory, this should make it more difficult for companies to evade paying their taxes.

Are you worried about corporation tax? At Stonehouse Accountants we have over 30 years experience in dealing with all types of tax. If you own or are part of a limited company, feel free to get in touch with us. We provide a full range of accountancy and consultancy services to make sure you’re always on the right side of the law.