Google faces £24m British tax bill over share scheme routed through Ireland
Company treated payment as tax deductible and charged it to Irish operation
Google offices in Barrow Street, Dublin. The internet giant, which employs close to 3,000 staff in Dublin, awards shares in the company to its 2,000 UK staff each year. Photograph: Cyril Byrne
Google is expected to be hit with a British tax bill of at least £24 million (€29 million) after a review by revenue officials of a staff share scheme that was routed through its Irish operations.
Google has made a provision for the expected tax bill in the accounts of its UK operation, which have been under scrutiny by British tax officials since 2010, according to a report in yesterday’s Sunday Times.
The internet giant, which employs close to 3,000 staff in Dublin, awards shares in the company to its 2,000 UK staff each year. Google paid £51 million to staff under the scheme in 2011 and £50 million in 2012.
Google has traditionally treated the payment as a tax deductible expense, and charged it to its Irish operation. HMRC, however, has tightened the rules on staff share payments and now instructs multinationals to treat them as revenue instead of an expense.
In its latest set of accounts, Google’s UK operation set aside £24 million to deal with the issue. It said: “This is a matter the company is discussing with HMRC in an ongoing review initiated in 2010. The company has made a provision of £24 million for potential corporation tax for the years under review (2005-11).”
Heather Self, a UK tax expert at Pinsent Mason law firm, yesterday told the Sunday Times: “The [UK] government clarified the rules on tax deductions for share schemes to make it clear that aggressive positions taken by some companies would not succeed for the future.”
Other companies operating in this country could be affected by the clampdown.