Facebook UK pays £29m corporation tax despite record £3.3bn sales

Facebook's UK operations paid £29m in corporation tax last year despite reporting a record £3.3bn in sales, while its average staff pay rose to £262,000.

The social media company's latest accounts for its London-based arm showed gross income from advertisers surged by more than 37% last year from £2.4bn to £3.3bn.

Its parent company, Meta, which also owns Instagram and WhatsApp, is the second-largest player in the UK digital advertising market, after Google.

The Companies House filing for Facebook UK, which describes itself as a provider of sales support, marketing services and engineering support to the Meta group, reported £229.5m in pre-tax profits last year. This was up more than a fifth on the £190m the company made in 2020.

The company paid £29.8m in UK corporation tax last year, down on the £36.7m it paid the year before. Facebook said it spent £1.8bn on sales support, marketing services and engineering support services.

Facebook UK's tax charge was £69.7m last year, however deductions including a tax credit of more than £32m meant the company paid far less.

"Over the last year we've continued to invest in the UK, including opening a new office campus in King's Cross [in London]," said a spokesperson for Meta. "While we paid $8.52bn [£7.65bn] in corporation tax globally last year, and our average effective tax rate over the last decade was around 20%, under current rules the vast majority of this is paid in the US."

While Meta is now considering job cuts amid a slowdown in growth among big tech companies, its UK operation was on a hiring spree last year.

Its workforce grew 37% from 3,745 to 5,148 employees as the operation agreed leases on two new office sites, and extended an existing lease in London.

As a result, Facebook UK's staff bill soared by 46% year-on-year to £1.35bn, with staff receiving £458m in share-based payments. The company's UK staff earned an average of £262,000 each last year, up 6% from £247,400 the year before.

Like its tech peers Amazon and Google, Meta is frequently the target of criticism that it does not pay enough in tax in the UK.

Analysts at Insider Intelligence estimate that in total Meta took £6bn in UK ad spend last year.

In 2020, the UK introduced a digital services tax, which levies 2% of gross revenues and aimed to target large digital companies that make huge revenues but report relatively small profits.

Next year, it will be replaced by a new global tax system after the Organisation for Economic Co-operation and Development brokered a deal between 136 countries that will result in large multinational companies paying tax in the countries where they do business, and committing themselves to a minimum 15% corporation tax rate.

"Although we pay the required level of taxes under international tax rules, we understand there's frustration about how multinational companies are taxed and have long called for reform of the global tax system," said the Meta spokesperson. "We hope to see further progress towards implementing the OECD's tax agreement, which could mean companies like Meta paying more tax, and in different places."

Earlier this week, it emerged that Google paid £200m in UK corporation tax on pre-tax profits of £1.1bn in the 18 months to end of December.

The company reported £3.4bn turnover for the period. Analysts at Insider Intelligence estimate Google, which also owns YouTube, took £8.6bn total revenues in the UK last year.

Google UK's more than 5,700 staff earned an average of more than £385,000 each over the 18-month period, in part thanks to almost £1bn in share-based payments.