London - Facebook will stop routing advertising sales of its largest UK clients through Ireland, increasing its tax bill by millions of pounds in a bid to improve transparency after facing criticism on tax avoidance.
Changes will be put in place in April, with the higher tax bill to be paid next year. Smaller business sales, where advertising is booked online with no staff intervention, will still be routed through the company’s Ireland offices, which will remain the firm’s international headquarters.
On Monday Facebook will inform its larger UK customers that from April they will receive invoices from Facebook UK and not Facebook Ireland, a spokesman for the company told Bloomberg in an e-mailed statement.
This means UK sales made directly by the firm’s UK team will be booked in the UK, not Ireland. Facebook UK will then record the revenue from these sales.
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Facebook received widespread criticism in October after the social network giant was revealed to have paid only 4 327 pounds ($6,128) in taxes for 2014, less than the average UK worker. Google has also faced controversy over its UK tax affairs, settling a 130 million-pound payment in back taxes in January.
The overhaul of tax structure comes after increasing global pressure on its tax affairs and as a reaction to changing tax rules, the BBC, which first reported the news said, citing unidentified sources.
Its exact impact is yet unquantified. The new tax recognition structure will include customers such as food retailer Tesco and advertising giant WPP.