NETFLIX is the latest American company to face questions in the UK over its tax practices after it emerged the on-demand film and television streaming service paid no corporation tax last year.
Now boasting 4.5 million British subscribers and revenues of £200m, the company behind award-winning series including Narcos, Orange is the New Black and House of Cards charges customers a minimum of £5.99 per month to subscribe and has grown rapidly in Britain since its 2012 launch.
But analysis by the Sunday Times revealed the subscription fee paid by UK customers goes to Netflix International BV, based in Luxembourg until the end of 2014.
It is claimed that despite Britain being Netflix’s biggest market in Europe, the company is paying income tax in Luxembourg and not the UK. The British subsidiary of the accounts, Netflix Services UK, received an “income tax credit” of about £35,000.
The company, originally started in the US, reportedly said it is in “expansion mode” and is making an overall loss on its international growth. A spokesman for Netflix told the Times its British subsidiary employs some 12 people and will pay corporation tax this year, adding: “We are fully compliant with all applicable rules.”
Earlier this month, Cadbury’s US owners Mondelez found itself at the centre of controversy over its tax structure after it emerged it has yet to pay UK corporation tax since its £11.5bn acquisition of the chocolatier in 2011, when it was known as Kraft.
Fellow US companies Google, Amazon and Starbucks have also found themselves in the crosshairs over their tax practices in the last few years.
In July, it was reported that despite having around 65 million worldwide subscribers, the cost to Netflix of gaining licences for third party content was $7.7bn (£5.2bn), approximately 4.6 times its revenue.
Labour’s shadow Treasury minister Richard Burgon criticised the chancellor closing 153 HMRC tax offices, suggesting it helped companies to “undermine” British business.
Burgon said: “George Osborne needs to get a grip of this issue in the new year as after being Chancellor for five years he has no-one else left to blame but himself.
“Many families will be paying to sit down together this Christmas to watch programmes on Netflix and won’t expect that the money they give may be undermining British businesses.”