Facebook share price: Company pays almost no corporation tax in UK

Facebook Inc (NASDAQ:FB), the world’s largest social media company, has paid almost no corporation tax in the UK for a second year in a row, it has been revealed.

According to its annual filing to Companies House, the US tech giant incurred a corporation tax charge of just £3,169 and received a tax credit of £182,000. In the document, published yesterday, Facebook declared that its UK revenue had risen to £49.8 million in 2013, from £34.6 million a year earlier.

This figure is significantly lower than the estimates of market researcher eMarketer, according to which, the company’s London operation generated £371 million in revenue in 2013, up 67 percent from £223 million the previous year.

According to the filing, Facebook’s UK arm recorded a pre-tax loss of £11.6 million in 2013, even though its US parent posted a net profit of $1.5 billion (£900 million) that year. The company’s staff costs nearly doubled, boosted by a £15.5-million charge related to “share-based payments”.

In yesterday’s trading, Facebook shares closed down 0.4 percent at $78.37. The company’s stock has gained 43.4 percent since the start of the year.

Double Irish

The disparity between the estimates and the UK revenue declared by Facebook is a result of a complex tax scheme, through which a big portion of the company’s UK sales are funnelled to Ireland, where the corporation tax is much lower. In addition, the company can reduce its tax even further by shifting most of its taxable income from an operating company in Ireland to another Irish-registered firm in an offshore tax haven.

This scheme, known as ‘Double Irish’ is also being used by other US technology companies.

“Some technology companies go to extraordinary lengths to pay little or no tax here,” chancellor George Osborne said last month and promised to “put a stop” to such tax avoidance strategies.

According to the Financial Times, the 41 analysts offering 12 month price targets for Facebook have a median target of $90.00, with a high estimate of $100.00 and a low estimate of $57.54. As of 17 October, 2014, the consensus forecast amongst 65 polled investment analysts covering Facebook has it that the company will outperform the market. The same consensus estimate has been maintained since the sentiment of investment analysts improved on May 29, 2012, the FT notes.