SOCIAL MEDIA: Facebook paid £4.1m in UK tax last year

Facebook paid £4.16m in UK corporation tax last year, as it expanded its business in the UK.

It is a big increase on the £4,327 paid in 2014, which prompted an outcry from campaigners who argued it had paid too little.

However, critics may also be riled by the fact that the company will receive a tax credit of £11m, which can be used to offset tax bills at a later date.

The firm said it was "proud" to have grown its business in the UK.

The social network posted taxable profit for the year to 31 December of about £20m, on which it paid tax at the standard corporation tax rate. Turnover more than doubled to £210m.

The tax credit is the result of offsetting payments linked to its bonus scheme for staff.

Facebook said in March it would no longer route advertising sales through Ireland for its largest advertisers.

That change, which took effect on 1 April, should mean the US company starts paying millions of pounds more in tax in the UK.

A spokesperson for Facebook said: "We are proud that in 2015 we have continued to grow our business in the UK and created over 300 new high skilled jobs. We pay all the taxes that we are required to under UK law."

The figures were revealed in Facebook UK's accounts, which were published on Companies House on Sunday.

Richard Murphy, a chartered accountant and professor of practice in international political economy at City, University of London, said it was difficult to determine whether Facebook was paying the right amount of tax in Britain.

"Facebook's UK accounts do not represent its real sales in this country, which are actually booked in Ireland with their true value never being disclosed," he said.

'Exercise in opacity'

"The Facebook UK accounts just record the costs it incurs in the UK, with a bit of profit added on to keep HMRC happy. That's not good enough in the current climate.

"Facebook UK's accounts are an exercise in opacity when what we really need is transparency. If accountants continue to refuse to provide what users of accounts need then it will be time for the government to act."

Tax specialist Jo Maugham QC said: "Facebook's accounts are rather opaque. But we can be confident that the structure of its business continues to be driven by the desire to make the smallest possible financial contribution to the public infrastructure it uses."

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Analysis

Theo Leggett, business reporter

When Facebook revealed it had paid just £4,327 in tax in 2014, there was a storm of protest from campaigners. Like other digital era multinationals, it has come under fire for doing a great deal of business here, but paying very little into the national coffers.

2015's bill looks decidedly steeper, but it still appears to bear little relation to the amount of business actually being done by the company. It is based entirely on revenues from engineering and marketing services supplied to other parts of the Facebook group.

It will be different in future. The company agreed earlier this year to book sales to major UK advertisers in Britain, rather than Ireland - so they will be subject to tax here.

Although this won't include sales made over the internet, it should still mean a much bigger payment is due for 2016.

That may go some way towards appeasing campaigners - and keeping the UK authorities at arms length.