Written by: Keith Tully
Reviewed: Monday 20th June, 2016
Microsoft has been accused of avoiding UK taxes to the tune of around £100 million via deals it agreed with HM Revenue & Customs (HMRC) several years ago.
According to a Sunday Times report, the American technology giant has sent close to £8 billion worth of revenues derived from activities in the UK to its subsidiary in Ireland.
The vast sums were allegedly transferred from the UK to Ireland from 2011 onward so that the company could bring down its corporation tax liabilities.
Indeed, the financial manoeuvring is understood to have helped the multinational software and search engine company to see large portions of its revenues taxed at Ireland’s 12.5 per cent corporation tax rate rather than the UK’s more onerous 20 per cent rate.
However, the report from the Sunday Times suggests that far from deploying underhand tactics to reduce its tax liabilities within the British Isles, Microsoft’s policies received the approval of HMRC officials.
The report claims that HMRC approved the company’s offshore tax structure in 2012 and effectively gave it the green light to shift revenues from the UK to Ireland between 2011 and 2017.
The same report suggests that as many as 140 similar deals, referred to as being ‘advanced pricing arrangements’, have been struck between HMRC and some of the largest and richest companies in the world.
Advanced pricing arrangements are now under investigation by the European Commission in case they breach laws on the provision of state aid.
Alleged revelations about Microsoft’s offshore tax tactics come only a few months after Facebook agreed that it would stop routing profits from some of its largest UK advertising deals through Ireland.
The social media giant faced widespread criticism for it tax policies after it was revealed to have paid less than £5,000 in UK corporation tax during 2014, despite having apparently managed to generate profits worth close to £2 billion through its activities in the country during that same period.
Remarkably, it was revealed in March of this year that HMRC actually paid Facebook considerably more to advertise on its platform during 2015 than the company paid it in taxes in relation to its activities throughout the UK during 2014.