Microsoft is ‘let off £100m’ in new tax storm

MICROSOFT is said to have avoided paying £100million in tax to Britain in a secret deal approved by HM Revenue & Customs.

The company – one of the world’s richest – is among a number of digital giants accused of slashing tax bills by channelling sales through low-tax countries such as Ireland.

Corporation tax – levied on profits – is 12.5 per cent in Ireland compared to 20 per cent in the UK. It has emerged that more than £8billion of revenues from Microsoft computers and software bought by British customers has been sent to Ireland since 2011.

This arrangement, which is described as an advance pricing agreement and runs from 2011 to 2017, was approved by HMRC, according to The Sunday Times. HMRC is understood to have reached similar agreements with other multinational companies but refuses to disclose details, citing confidentiality. It denies they are a taxdodging mechanism.

Microsoft Ireland Operations accounts show that in the year to June 2015 sales of hardware and software in the UK generated more than £2.3billion of

‘We all think they are sweetheart deals’

revenues. The tax paid by the UK arm in that year was only £16.9million. The revelations will heap new pressure on Chancellor George Osborne who has been accused of doing far too little to make multinationals pay a fair share of tax on the profits made from British families.

Earlier this year he hailed the fact that Google had agreed to pay £130million in back taxes for the years 2005 to 2014 as a ‘major success’. The figure was minuscule in the context of Google’s annual UK sales of around £4billion.

Richard Bacon, a Conservative member of the Commons public accounts committee, called on HMRC to disclose more details of its arrangement with Microsoft and other organisations.

Labour’s Margaret Hodge, chairman of the all-party parliamentary group on responsible tax, said: ‘We need to see the agreements made because we all think they are sweetheart deals.’

Microsoft said it ‘complies with all rules and regulations worldwide’.

HMRC said the advance pricing agreements made with Microsoft and others are not a mechanism to avoid paying tax.

And it added: ‘No company will pay a single penny less in tax.’