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Facebook accused of 'picking and choosing' tax rules after paying just $5 million in UK

Facebook ended up with an £11.3 million ($14 million) tax credit in the U.K. last year, which more than offset the amount it was charged, according to a new company filing, adding to concerns that the social media giant isn't paying enough into the country's coffers.

The U.S. social network paid £4.1 million in tax to the U.K. in 2015, a sharp rise from the £4,327 in 2014 that sparked outrage from campaigners, accounts filed with Companies House showed.

But it reported a tax credit of £11.3 million for the year, which effectively can be used to offset future payments. The credit stemmed from tax rules linked to an employee bonus program at Facebook.

"We pay all the taxes that we are required to under UK law, " a Facebook spokesperson told CNBC.

"We are proud that in 2015 we have continued to grow our business in the UK and created over 300 new high skilled jobs. The UK is now home to some of the most innovative technologies in the world including our investment in a high-tech solar powered plane centre in Somerset that will help bring the internet to remote areas of the world."



People silhouetted against Facebook logo
Dado Ruvic | Reuters

Facebook's accounting practices were in line with U.K. rules, but critics slammed the U.S. firm, which has a market cap of $371 billion.

"Facebook U.K.'s accounts show specific issues, but point also to the real problem: that major multinational companies appear to be able to pick and choose, unlike the rest of us, where and how much tax they will pay," the campaign group Tax Justice Network said in a statement on Sunday.

The company's activity in the U.K. – where it had 854 employees at the end of 2015 – is mainly focused on sales support, marketing and engineering. Facebook's turnover in Britain amounted to £210.7 million in 2015, up from the £104.9 million recorded in the previous year. But it recorded a loss after tax for the year of £41.1 million, which widened from the £28.4 million booked in 2014.

Despite this, Facebook made profits of $3.7 billion globally in 2015 on revenues of $17.9 billion.

Political wranglings

The filing of the accounts comes as big businesses' tax procedures are in the spotlight once again. Last week, U.K. Prime Minister Theresa May sent a warning to businesses who dodged paying tax, telling them that the government is "coming after you".

"If you're a boss who earns a fortune but doesn't look after your staff, an international company that treats tax laws as an optional extra, a household name that refuses to work with the authorities even to fight terrorism, a director who takes out massive dividends while knowing that the company pension is about to go bust. I'm putting you on warning. This can't go on anymore. A change has got to come," May said in a speech.

Facebook has made moves to change where its taxes are booked. In March, it said it would no longer route advertising sales made by its U.K. team through Ireland, and instead record them in Britain. This began in April and is likely to boost revenues for 2016, which will show up in accounts filed in 2017.

Authorities globally are trying to clamp down on U.S. technology companies' tax practices. In August, the European Commission, the European Union's executive arm, ordered Ireland to claw back 13 billion euros ($14.5 billion) in back taxes from Apple. Google meanwhile agreed to pay the U.K. £130 million in back taxes earlier this year.