Introduction
The previous Committee’s report on Google’s tax affairs in June 2013 concluded that Google used an artificial tax structure which served to avoid UK taxes rather than to reflect the substance of the way business is actually conducted. The Committee noted that the “UK is a key market for Google but the enormous profit derived is out of reach of the UK’s tax system.”1 It also found that to avoid UK corporation tax Google relied on “the deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes places in the UK.”2 In January 2016, Google announced that it had agreed to pay an additional £130 million in corporation tax, covering the period January 2005 to June 2015, following the conclusion of a six year investigation by HMRC. On the eve of our evidence session, with Google’s consent, HMRC submitted a document setting out some further facts in relation to the settlement. We now know that much of the tax in dispute related to the application of transfer pricing rules, that £18 million of the settlement was interest on the tax due, and that HMRC did not apply a penalty. We also know that the UK is Google’s second largest market (after the US), contributing over US$7 billion in revenue in 2015, or around 10% of Google’s worldwide revenue. In its latest UK accounts, for the 18 months ending June 2015, Google reported a UK corporation tax liability of £46 million. HMRC also told us that Google’s total charge for corporation tax and interest from 2005 to 2015 was £196.4 million.
© Parliamentary copyright 2015
Prepared 23 February 2016