Internet giant Google has put aside £24m to pay corporation tax in the UK following a review of the way the company pays its employees in shares that are billed through its Irish subsidiary. Google has some 2,000 UK employees; in 2011 they received £50m in US shares and they received a similar amount in 2012.
Although this share-payment scheme was legal, HMRC scrutinised the arrangements because the company claims the payments as tax-deductible but under new guidelines share payments must be counted as revenue. As a result, Google said in its 2012 accounts, the company had "made a provision of £24m for potential corporation tax for the years under review".
Google has faced persistent criticism over its tax arrangements. Last June the Public Accounts Committee (PAC) of MPs called on the company to be investigated when former employee turned whistle-blower Barney Jones claimed the UK branch engaged in advertising sales, despite Google's insistence that sales took place in Ireland – a practice he described as immoral.
“The company's highly contrived tax arrangement has no purpose other than to enable the company to avoid UK corporation tax.”
Speaking about that arrangement, chairwoman of the PAC Margaret Hodge said: "Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. The company's highly contrived tax arrangement has no purpose other than to enable the company to avoid UK corporation tax."
Similar schemes have been adopted by other technology giants including Apple, Facebook and Amazon. In 2012, Apple's UK revenue was estimated at £9.5bn and Facebook's at £307m, yet neither paid any corporation tax. Amazon, which had revenue of an estimated £3.7bn, paid just £2.4m in corporation tax.
Whereas Amazon channels its financial transactions through Luxembourg, Google, Facebook and Apple base their European operations in Ireland, which has lower corporation taxes than in the UK. However, a spokesman for Google pointed out that the company pays much of its corporation tax in the US and it remains a significant contributor to the UK, paying around £150m in tax.