Facebook is ditching its UK tax strategy following new ruling

Facebook and Britain Taxes

Facebook will stop booking sales to UK clients via its operations in Ireland. The practice is used by many tech companies in the region as they attempt to reduce tax bills.

The British government recently introduced a new tax on profits that have been shifted offshore.

In the future, Facebook will report its UK sales in Britain.

“In light of changes to tax law in the UK, we felt this change would provide transparency to Facebook’s operations in the UK,” the company said in a statement.

Public anger over tax evading companies led the government last year to introduce the “diverted profits tax”, widely known as the “Google tax,” after the search giant operated a similar structure to Facebook’s.

The goal of the new tax structure is to charge company’s who earn money in the UK and then immediately move that money out of the country.

Google agreed to pay 130 million pounds ($184 million) in UK back taxes and interest in January 2016. Following that payment the company said it would start paying more taxes in the country.

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Facebook is expected to pay millions of pounds more in tax per year because of the tax structure shift.

The UK tax authority, Her Majesty’s Revenue and Customs (HMRC) will need to take a tougher stance on Facebook’s reporting in order to pull in more revenue.

While the new structure will see more revenue reported in Britain, Facebook will only pay more tax if the company or HMRC decides more profit is being earned in Britain than Facebook previously claimed.

HMRC has downplayed the idea that the new law would lead to higher tax bills.

UK lawmakers have repeatedly criticized HMRC for being too lenient on big businesses.

The HMRC and Facebook are not commenting further at this time.

Written by Franklin Simmons

Franklin Simmons

Franklin Simmons is BusinessPundit's Tech Editor. His life is consumed with a love of augmented reality, mobility, and emerging technology. He extensively covers all areas of technology, including the computing, automotive, and healthcare sectors.