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  1. ITV Report

Google accused of being 'less than transparent' after revealing latest UK tax payments

Revenue dropped £141 million in the year to June 30 2016 to £1 billion, from just under £1.2 billion for the previous 18 months Credit: PA

A tax expert has accused Google of being "less than transparent" after the search giant said in its UK accounts that it had made sales of £1 billion - despite declaring a figure of £5 billion to US officials.

Revenue dropped £141 million in the year to June 30 2016 to £1 billion, from just under £1.2 billion for the previous 18 months.

But in Google's US accounts for 2016 the company said it made sales of $7.8 billion in the UK - which is £5.65 billion at current exchange rates.

That means it paid just £36.4 million in UK corporation tax on pre-tax profits of £148.8 million - much less than if the full £5.65 billion of turnover had been put through the UK.

It is the result of a legal loophole which means some sales are recorded via Ireland where the revenue is untouchable by the UK taxman.

£1bn
UK sales declared in UK accounts
£5bn
UK sales declared in US accounts
Google paid just £36.4 million in UK corporation tax on pre-tax profits of £148.8 million Credit: PA

Tax expert Richard Murphy, a Professor of Practice in International Political Economy at City, University of London, told ITV News: "What this implies is that £4 in every £5 that Google sells in the UK is not subject to UK tax, and as the accounts note, this is with the full agreement of our tax authority."

He added: "The implications are big. Google is reporting profits in its UK accounts of £149 million, or roughly £15 for every £100 of sales it does actually record here.

"But if, as its US accounts imply, Google should be recording five times more here than it does then the profit in the UK would logically be at least five times higher too.

  • Tax expert Richard Murphy speaks to ITV News

"And in that case so too would be the tax payment be bigger. And that’s why this matters."

The company has faced mounting pressure over its tax affairs amid a backlash against corporate tax avoidance by multi-national companies.

Google agreed to a controversial £130 million deal with HM Revenue & Customs in January last year to settle a 10-year tax inquiry into its UK business.

Google has faced mounting pressure over its tax affairs amid a backlash against corporate tax avoidance by multi-national companies Credit: PA

A Google spokesman said: "As an international business, we pay the majority of our taxes in our home country, as well as all the taxes due in the UK.

"We have recently announced significant new investment in the UK, including new offices in Kings Cross for 7,000 staff."

The tech company paid £46.2 million in corporation tax for the previous 18 months to June 30 2015.

That covered an extra six months of business before Google moved to a 12-month accounting period the following year.

Google said both administrative costs and turnover for the period decreased as a result of the accounting changes.

Labour's Shadow Chancellor John McDonnell hit out over the accounts Credit: PA

Labour's Shadow Chancellor John McDonnell tweeted: "It seems Hammond and May are more interested in cutting Google’s taxes than making them pay their fair share.

"We urgently need clarity on HMRC’s relationship with Google and what reassurances have been provided to the company."

HM Revenue and Customs (HMRC) declined to comment on Google's tax payment, saying it did not discuss identifiable taxpayers.

An HMRC spokesman said: "Everyone has to pay the tax due under the law and we do not settle for less.

"Our most recent figures show that HMRC brought in a record £26 billion in extra tax for our public services, with £7.3 billion of that total coming from the 2,100 largest and most complex businesses in the UK."