Turner Little discusses the breaking news that Google has reached a major UK tax deal with HM Revenue and Customs (HMRC).
Google’s tax
Google has long been accused of using complex tax structures to avoid “paying its fair share of tax” in the UK. For example it paid £20.4 million in taxes to HMRC in 2013, but the value of its UK sales that year were £3.8 billion. As a US-firm, Google pays the majority of its taxes there, while its European headquarters are in Ireland, so the business pays lower corporation tax than it would if its European base was in the UK.
Google has reportedly taken advantage of international tax rules. The company has utilised complex tax structures in Bermuda to benefit from the territory’s zero tax rate. HMRC has conducted a six year enquiry of multinational businesses such as Google and Amazon, which operate in the UK but are headquartered in other countries, examining why they pay such low levels of tax on their UK revenue.
Deal with HMRC
Online small business publication BM Magazine recently reported that Google has now agreed to pay £130 million in taxes to HMRC. The firm also said it will alter its accounting system so that a higher proportion of its sales activities are registered in the UK instead of Ireland. Google has promised to pay more tax on these sales going forward, as well as use a different structure to account for its British profits in the decade from 2005 to 2015.
Commenting on the news Matt Brittin, the head of Google Europe said to the BBC: “The rules are changing internationally and the UK government is taking the lead in applying those rules so we’ll be changing what we are doing here.” Throughout the past year the Organisation for Economic Cooperation and Development (OECD), which produces guidance on world tax agreements, has tightened international tax rules. Specifically, the OECD focused on ensuring that multi-national businesses refrain from shifting profits between countries to avoid paying tax.
Complying with changes
Continuing, Brittin said: “We are paying £130 million in respect of previous years when the rules were to pay in respect of profits you make in a country and then going forward we will also be paying in respect of sales to UK customers… We were applying the rules as they were and that was then and now we are going to be applying the new rules, which means we will be paying more tax.”
Elaborating, Brittin suggested: “I think there was concern that international companies were paying only in respect of profits that they make and those were the rules and the pressure was to see us pay in respect of the sales we make to UK customers – and the same for other companies. So, we are making a change because we want to continue to comply with the rules and the rules are changing.”
Turner Little
Speaking further, Brittin said: “I think the international rules are quite complicated and the OECD has just gone through a big process to try to simplify them and that is why the rules are changing.”
With tax rules changing, it’s vital you’re aware of your tax obligations when you establish an offshore company. Turner Little provides the offshore company formation services you need to ensure you meet the financial requirements involved in establishing a business.
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agents, Registered Bank Intermediaries and Business Consultants, as well as Trust providers.
