Tax experts have poured cold water on a heated debate over Google’s agreement to hand over £130m to HM Revenue & Customs (HMRC) in unpaid corporation tax, dismissing suggestions that the deal was unfair.
Tighter rules surrounding corporation tax will result in a string of companies striking deals with HMRC, accountants say.
“There will be lots of businesses that will be having discussions with HMRC,” said Ian Young from the Institute of Chartered Accountants in England and Wales (ICAEW).
Young added that while Google’s corporation tax bill may have looked small to some, it was just one part of a much larger tax bill for the tech giant, which contributes more in national insurance contributions and business rates: “It will be paying shed loads of taxes to the UK authorities, in addition to the corporation tax.”
Read more: Google agrees to pay £130m in back taxes
Glyn Fullelove, chairman of the International Taxes Committee of the Chartered Institute of Taxation (CIOT), added: “What we have seen in the last year is the introduction in the UK of diverted profits tax which is designed to ensure that whatever value is created in the UK is actually taxed here and to tighten the UK’s rules.
“There may well be that the diverted profits tax is encouraging companies to go forward to discuss with HMRC the amount of profit they’ve got attributed to the UK, especially if HMRC have already been challenging this.”
Fullelove said the public is often mistaken when it comes to company’s tax payments: “There’s a little bit of misconception between paying tax on revenue and paying tax on profit. A lot of companies that have very large sales in the UK don’t actually have large profits in the UK.”
Politicians have not shied away from sparring over the issue, with shadow chancellor John McDonnell calling on chancellor George Osborne to publish the details of what HMRC thought the tech company actually owed. Financial secretary to the Treasury David Gauke, meanwhile, called the deal a “a real vindication” of the Tory government: “The Google tax bill dates back to the middle of the last Labour government, which did absolutely nothing about it.”
Meg Hillier, who chairs the Public Accounts Committee, said MPs would call on both HMRC and Google to publicly answer questions about the deal.
An HMRC spokesperson said: “HMRC enforces the tax rules impartially, irrespective of the size or structure of the business. Last year our compliance activities yielded £26bn in extra tax, including £7.3bn from the largest and most complex businesses.”