Multi-nationals and sweetheart deals.

 In an unprecedented move, HMRC have issued a press release regarding the accusation that Google were offered a deal that short changed UK taxpayers. Here’s what they had to say regarding the “sweetheart deal” accusation and the settlement with Google:

‘Sweetheart deal’

HMRC does not do “sweetheart deals”.

The National Audit Office has full access to our papers and has in the past scrutinised the way that we resolve disputes in large and complex enquiries. In 2012, it appointed a retired High Court Judge to examine our largest settlements and concluded that HMRC had obtained good settlements for the country in all cases. The NAO also made recommendations, which we implemented. In large, complex cases, three HMRC Commissioners have to approve any proposal for resolving disputes, including one Commissioner from an area of the business which is not directly responsible for the enquiry and the Tax Assurance Commissioner, who oversees the process and publishes an annual report on his work.

This process is subject to routine scrutiny by the NAO.

The Google enquiry

On 22 January 2016, Google announced that it had reached agreement with HMRC to pay an additional amount of £130 million in Corporation Tax and interest, as a result of HMRC’s investigation which started in 2010. This sum is over and above the tax that they have paid for past years (or would pay for the current period were it not for HMRC’s enquiry). The current tax charge that Google took in its accounts increased significantly from 2012, when the company first disclosed that it was under enquiry and made a provision for additional tax.

Some commentators have applied Google’s group profit margin to its sales to UK customers and estimated that Google’s UK Corporation Tax is equivalent to an effective tax rate of around 3% on the group’s profit’s arising in the UK.

This calculation does not reflect how tax law works.

In accordance with our published guidelines on resolving disputes, HMRC has taxed all of Google’s profits chargeable to tax in the UK for the period in question, at the full statutory rate of tax.

There has been media speculation about what other European tax authorities are doing regarding Google. We can’t comment on enquiries carried out in other countries, or on media speculation about them. So far, there has been no public confirmation that other countries have concluded enquiries with Google, either by agreement or by litigation. HMRC is satisfied that our enquiry has secured all the tax that is due in the UK.”