Surely shifting your profit to the shareholders to the extent you lose 28 million shouldn't earn you tax credits sinced the shareholders will no doubt also be offshore.
Facebook's UK wing paid just £4k in corporation tax last year
Facebook has once again ponied up corporation tax to Blighty's HM Revenue & Customs – this time around handing over the vanishingly small sum of £4,000 to the Treasury. Last year, the free content ad network coughed up £3,169 to HMRC, but that figure was offset by tax credits. In 2012, Facebook didn't pay a penny in …
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Monday 12th October 2015 15:03 GMT Fonant
Thanks to the Tories shareholders will pay 7.5% on top of their top tax rate on share dividends next year. So company income taxed with CT will be taxed again when distributed as dividends.
Probably not a problem for the big boys, but it could well increase my tax bill from my one-man-limited-company by 30%. They're not the party of small business.
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Monday 12th October 2015 20:26 GMT Preston Munchensonton
In case you weren't aware, there isn't a party for small businesses. Parties coalesce around power and money, which small business have but in far fewer number than larger ones. Does anyone think that the progressives or conservatives would possible think about what's best for competition? Given all the rent-seeking that run rampant in tax law and industry regulation, it's little wonder that rules like the one mentioned won't actually effect the parties for whom they were publically intended.
/rantover
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Monday 12th October 2015 14:54 GMT Anonymous Coward
Re: £4K?
Yawn. As well as contractors paying much more than 4k in tax, all their payments stay in the UK. They pay tax here, spend money here, live here, and keep their skills up to date here.
Leeches like Facebook et al just take.
Now before anyone says "this is acceptable business practise", you start a business - no matter how legitimate - in the UK and try some Facebook / Amazon / Starbucks style tax avoidance, or some Uber style law-ignoring. You won't get very far. This is a privilege our governments give american companies only.
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Monday 12th October 2015 11:31 GMT The Axe
Companies don't pay tax
Facebook itself paid tax, but it was only doing on behalf of the shareholders, the employees, and the customers of Facebook. In other words it was people who paid the tax, in lower dividends, lower wages or more expensive product prices.
Companies don't pay tax, people do. All companies do is collect it and act as a tax collector for HMRC. Even employers NI is really a tax that employees pay, it's just that they don't see it but it does affect their salary, making it lower.
So Facebook staff got a nice bonus. Well they pay tax. So Facebook itself paid a low corporation tax and did so by giving the staff a bonus. Tax was not avoided, just redirected and assigned to a different accountancy column.
PS. Corporation tax is on the PROFIT a company makes. If it decides to invest, or give large bonuses, or dividends which lower profit then it will lower the corporation tax. That is all legal, and moral, and ethical. Corp tax is not on turnover.
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Monday 12th October 2015 14:58 GMT Anonymous Coward
Re: Companies don't pay tax
>>>> good point - if the company does make a profit - then that profit will go to some people and then those people pay tax on it.
Ok, you start a coffee shop, or an internet book shop, or a "ride sharing" service and try and compete with foreign companies paying no tax. See how far you get, see how your prices just to break even compare to theirs. That's the damage tax avoidance does, it kills any home grown competition.
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Tuesday 13th October 2015 08:47 GMT LucreLout
Re: Companies don't pay tax
@tombo
Ok, you start a coffee shop, or an internet book shop, or a "ride sharing" service and try and compete with foreign companies paying no tax. See how far you get, see how your prices just to break even compare to theirs.
Putting aside for a moment any perceived rights or wrongs of this, because your moral position will vary from the next persons, you're assuming that the home grown competition won't structure themselves along the same lines as the foreign domiciled companies, when that is certainly not always the case.
EU law prevents HMRC from insisting that any business deriving most of its income from the UK must be domiciled in the UK - it could be anywhere in Europe. International law and various free trade agreements open up a further tier of corporate structuring possibilities which are available to all.
Without going into a level of detail my previous employer would resent, while HMRC may know everything about my UK based subsidiary, they know less about my head office in Prague, and they know absolutely nothing about the businesses from which we buy products and services abroad. (I don't own any companies anywhere - this is a hypothetical example).
The tax man accepts almost all voluntary donations to an address on Horseguards. There's nothing stopping anyone who favours higher taxes from raising their own prevailing rate. People won't, obviously, because 9/10ths of those most vocal on tax issues won't even show enough commitment to their apparent beliefs to boycott Facebook over this; and that tells you all you really need to know about them.
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Monday 7th December 2015 16:04 GMT Anonymous Coward
Re: Companies don't pay tax
"As a partner in a small business we factor salary + employers NI into how much we *actually* pay staff. If NI went down, we'd pay our staff the equivalent difference. We're nice that way."
Meanwhile the corporates and their book-keepers have discovered a similar fiddle and called it "salary sacrifice". Benefits which historically have been taxable miraculously start being paid for by an downward adjustment to your before-tax salary.
IIRC the benefit to the company is that they dodge paying tax and/or NI on the benefit.
I think the benefit to the employee is often negligible or nil (or even negative if you count corporate tax dodging as a negative, as some do). Motivating factors for employees to sign up include "sign up for salary sacrifice or you'll never get another pay rise, ever" (at one company where I've worked, a well known but rather troubled one headquartered in Derby).
https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye
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Monday 12th October 2015 13:44 GMT Raumkraut
Re: Companies don't pay tax
Companies don't pay tax, people do.
Given that actors in modern economies are all so intricately intertwined, it seems to me that making such a distinction is pretty much meaningless, except to push a political agenda.
Sure, a tax directed at companies will affect the amounts they give and take from people. But conversely, a tax which is directed at people will also affect the amounts they're willing to give and take from companies.
Any tax is really just a tax on the economy as a whole, so who has to pay any tax should really be decided solely based on where is most efficient to extract it.
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Monday 12th October 2015 12:31 GMT Anonymous Coward
Of course that is true that those shareholders will be paying the tax.
But where do those shareholders live? They will be paying their own countries tax.
This isn't a dig at them, this is a dig at the UK's technology sector, it is pretty terrible now and all the companies that are dominating the UK market are based in other countries.
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Monday 12th October 2015 14:04 GMT James 51
On a company the size of facebook £5,000 should be considered running at a loss. All it would take is a few days of extra heating/cooling requirements or even hire a cleaner on a part time basis and they'd be in the red. There has probably been some tax management deployed to managed the figure to that level.
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Tuesday 13th October 2015 00:44 GMT Anonymous Coward
Surely a tax on the value of data is in order. Since it is valuable as everyone likes to say then transferring more than 10,000 USD out the country should be subject to money laundering law and also any data collected in the year be counted as taxable income. Oh well, maybe if they paid tax on data they might naturally rethink all those laws again.
How long before data blocks are bought and sold on the open market ready to be mined? Such a f'kd up world we live in.
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Tuesday 13th October 2015 08:57 GMT Anonymous Coward
@terra re Data trading?
"any data collected in the year be counted as taxable income. Oh well, maybe if they paid tax on data they might naturally rethink all those laws again. How long before data blocks are bought and sold on the open market ready to be mined?"
Correct me if I'm wrong but isn't that basically the way that Carbon Emissions Trading is supposed to work (except with carbon rather than data, obviously)?
So surely you *could* have a data emissions boundary tax as well, for data emissions that cross trading boundaries. D E B T.
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Tuesday 13th October 2015 11:01 GMT Paul 76
Err....
Dividends are after tax.
Payment to staff is before tax.
If a company has a working profit of £1m but reduces that to zero by dividing it all up between employees, the no CT is paid (no profit) but IncomeTax and NI are paid on the money, which is more than the current CT rate.
And, no, you can't just "move it offshore"
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Monday 12th October 2015 11:48 GMT J.G.Harston
Yes, force Facebook to pay their staff and shareholders less so they have more money to pay corporation tax instead and lose all that lovely income tax.
Surely anybody with any tenuous grasp of sums would prefer to be collecting income tax ranging between 20% and 40% instead of corporation tax at 20% dropping to 19%.
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Monday 12th October 2015 12:49 GMT DaveDaveDave
"Surely anybody with any tenuous grasp of sums would prefer to be collecting income tax ranging between 20% and 40% instead of corporation tax at 20% dropping to 19%."
Of course. And when you look at the net effects of criticising companies like Facebook, and at how ludicrous the case against them is, you see that really the desire is nothing to do with collecting taxes.
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Monday 12th October 2015 16:56 GMT NotWorkAdmin
Which is exactly why...
...I wonder what the point of corporation tax even is. If we stopped charging it, companies like FB would employ more people here and they'd pay the PAYE. All corporation tax achieves as far as I can tell is to make domestic businesses uncompetitive and why the heck would we want that.
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Monday 12th October 2015 21:28 GMT Roland6
Re: Which is exactly why...
"...I wonder what the point of corporation tax even is."
In general, it is a lever that enables a government to encourage reinvestment in a business; which includes paying declaring bonus's or employing more people. So to some extent it counters shareholder demands for dividends.
Interestingly, recent governments have been encouraging companies to set up R&D capabilities in the UK, because these are largely profit sinks and whilst these are unlikely to declare a profit, they will employ people who will pay PAYE, NI etc.
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Monday 12th October 2015 11:51 GMT Dr. Mouse
£4k?!
I pay more tax than that!
Corporation tax is not fit for purpose. I firmly believe it should be scrapped, and all the profit should be taxed (at normal PAYE rates) as it is taken out of the company. Tax individuals, not companies: The companies just avoid it anyway*.
* OK, so do many high-income individuals, but that's a separate matter.
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Monday 12th October 2015 14:58 GMT Anonymous Coward
Re: £4k?!
> I pay more tax than that!
Get a better accountant then.
Facebook paid the tax due (unless you are accusing them of something?) and there's nothing to see here. Or are you suggesting that everyone starts to pay MORE tax than is due?
If this really grinds your gears, then go and speak to you MP about it. They are the one who can effect change.
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Tuesday 13th October 2015 08:48 GMT Dr. Mouse
Re: £4k?!
Facebook paid the tax due
I know they did. And it doesn't really "grind my gears", so much as it seems unfair.
Now, in the end, they will be paying a lot more than that worldwide. However, I still feel that corporation tax is a waste of time.
My own take on it would be (simplified version):
* Scrap corporation tax.
* Change the rules such that all individuals (including foreign) to pay tax on all UK income at standard income tax rates.
* Tax the money as it leaves the company and is paid to individuals, in the form of dividends, wages, or anything else.
Individuals are less likely* to be able to use fancy accounting to get out of paying tax, and have more to loose (no limited liability etc).
* Yes, I know that there are rich individuals who find a way, and are able to move money outside the country etc, but they have less options available to them than large corporate structures.
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Monday 12th October 2015 17:41 GMT Synonymous Howard
Re: RTFA (@Bernard M. Orwell)
Badly worded article.
To quote the BBC ...
"Its most recent Companies House filing shows the company as making a pre-tax loss of £28.5m last year, but the firm also paid its 362 UK staff a total of £35.4m in share bonuses.
The share bonuses amount to £96,000 on average per UK Facebook employee."
And the Gruniaad ...
"Facebook made an accounting loss of £28.5m in Britain in 2014, after paying out more than £35m to its 362 staff in a share bonus scheme, according to the unit’s latest published accounts. Operating at a loss meant that Facebook was able to pay less than £5,000 in corporation tax to HM Revenue for the year.
The share scheme was worth an average of more than £96,000 for each member of staff. Once salaries were taken into account, a British employee of Facebook received more than £210,000 on average."
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Monday 12th October 2015 18:58 GMT Yet Another Anonymous coward
Re: RTFA (@Bernard M. Orwell)
It would be interesting to see the breakdown on that.
Did a bunch of engineers in the UK each receive an extra £96,000 in cash, pay income tax on it, then spend the money in local shops.
Or did a bunch of senior VPs receive a £1M in shares which they laundered through their own Cayman island holding companies so that when they sell them they will pay 0% capital gains tax instead.
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Monday 12th October 2015 12:13 GMT silent_count
The Worstall Effect
After looking at the comments on this story, I'd like to thank Mr Worstall for his articles.
It's fairly obvious that the readership of El Reg (myself included) has become markedly more economically literate, which in turn has raised the level of discussion.
Cheers to you all!