Facebook criticised for £238,000 UK tax bill last year

By Dan Cairns
Newsbeat reporter

Facebook UK paid £238,000 in tax last year, according to its accounts.

Its sales were £20.4m, despite an estimate that it actually pulled in £175m from advertising sales in 2011.

Most of the company's income is instead believed to be legally going through its European base in Dublin, where corporation tax is lower than the UK.

Campaign group The Taxpayers' Alliance said the tax system needed changing to encourage companies to pay their tax in the UK, rather than another EU country.

Chief Executive Matthew Sinclair said: "Too many companies can exploit the loopholes in the current tax system to minimise their bills.

"Others do pay their fair share but the system is so complicated.

"Ireland's low corporation tax rate is attracting globalised companies who are highly mobile, while our lumbering tax system simply cannot cope."

Based abroad

Companies operating in the EU are able to base themselves in any member country to take advantage of skilled workers or lower tax rates.

Google also has its EU headquarters in Dublin and earlier this year was criticised for paying £6m tax on UK revenues of £395m.

Facebook's latest accounts also show it made a pre-tax loss of £13.9m in 2011, compared with a £1m profit in 2010.

But the company's figures show that's down to a £15m charge to fund a share scheme for its 90 UK staff.

Facebook said the figures didn't reflect the overall health of the company.

A spokeswoman said: "As is normal for an organisation operating in dozens of countries around the world, we regularly file reports about local operations.

"The information does not necessarily present a full account of overall global financial performance so it would be a mistake to draw any conclusions from these filings."

'Operating legitimately'

Despite reporting £20.4m in UK sales, media research group Enders has estimated Facebook UK brought in £175m in revenues in 2011.

However, some tax experts say the company's figures need to be put in perspective and stress that Facebook isn't doing anything illegal.

Mike Warburton, director at tax experts Grant Thornton, said: "It [Facebook UK] operates legitimately as a service provider to the group."

Mr Warburton also called the £238,000 figure "rather meaningless".

"It just relates to corporation tax on sundry items like investment income," he said.

"Facebook UK made a loss on trading which would have no tax liability, and perhaps some losses to carry over to next year.

"In addition, there was about £15m charge on the employee share options, again fully allowable for corporation tax purposes."