Netflix faces new probe into how it escapes tax bills

THE taxman has launched a deeper probe into Netflix after the video streaming giant pocketed thousands of pounds from UK taxpayers, The Mail on Sunday can reveal.

HM Revenue & Customs is investigating the American firm’s UK business for 2018 when its main subsidiary here received a £52,000 tax credit, following a £180,000 tax credit the year before.

It follows investigations into the amount of tax paid in previous years by the £170 billion company.

The Government’s digital services tax came into force in April – aimed at getting tech giants to pay their fair share of tax – but it does not include Netflix.

The firm has paid minimal taxes in the UK even though it has around 12 million users here paying up to £11.99 a month for its services.

The new tax only covers social media firms such as Facebook, search engines such as Google and online marketplaces such as Amazon. Dame Margaret Hodge told MPs earlier this year that UK taxpayers were ‘being taken for a ride’ by Netflix pocketing tax credits.

News of HMRC’s move comes after it emerged Amazon has told small firms that use its online marketplace it would pass on to them the 2 per cent digital services tax on revenues made online in the UK.

Netflix’s subscriber numbers have surged during lockdown. But profits are funnelled through separate accounts at its European HQ in the Netherlands, which has a lighttouch tax regime.

It is unclear what the outcome of HMRC’s probes into 2015 and 2016 were or if they have concluded, but Netflix’s annual report has revealed it is now ‘under examination’ in the UK for 2018.

Netflix Services UK Limited is the company’s main UK subsidiary.

It was set up to provide support services to the Dutch arm Netflix International BV. Britons’ subscription fees go straight to the Amsterdam company.

In 2018, its last set of available accounts, the UK arm had revenues of £43 million, with pre-tax profits of just £2.1 million. It received a tax credit of £52,000 in 2018, thanks largely to Government incentives for firms to produce TV shows.

Netflix does not say exactly how much it makes in the UK, but the think-tank TaxWatch estimates it made £1.1 billion in revenues in the UK last year. This should have generated £68.5 million in profit and therefore taxes of £13 million.

Netflix Services UK says it only had 29 staff by the end of 2018. Yet it is on the hunt for a large UK HQ.

HMRC said it could not comment on identifiable businesses but it ‘undertakes enquiries to ensure a business’s tax position is correct’.

Netflix was asked for comment.