United Kingdom

Netflix paid just £3.2m in corporation tax on £13.2m profits in 2019

Netflix paid a paltry £3.2million in UK corporation tax despite income from 11milion British subscribers reaching £940million by claiming it is spending huge sums on shows like The Crown and 'talent' such as Prince Harry and Meghan Markle, it was revealed today.

The streaming giant, which has enjoyed an even better 2020 as millions more people signed up because of the coronavirus pandemic, recorded a pre-tax profit of £13million in its most recent accounts from 2019.

The £3.2m corporation tax bill - paid on declared UK profits rather than its giant revenues - is still the most it has ever paid since it launched in Britain eight years ago. 

Netflix funnels hundreds of millions of pounds of UK monthly fees through its headquarters in the Netherlands, meaning its profits are mainly taxed at the lower Dutch rate.

But the streaming giant insists that it puts almost half its revenues back into TV and films. Among those benefitting are Prince Harry and Meghan Markle, who are expected to earn up to £190million producing shows on their pet projects.   

These costs are used to legally reduce profits Netflix is taxed on, but has caused outrage online among Britons urging them to 'pay more tax'.

Netflix paid a minuscule £3.2million in UK corporation tax in 2019 despite revenues heading towards £1billion

Netflix is claiming profits are low because of the amount it spends of productions like The Crown

Subscribers' cash is also paid out to 'talent', including Prince Harry and Meghan Markle who recently signed a deal said to be worth £190million

Critics have tweeted Netflix directly demanding they may more tax in the UK, where they have 11million subscribers

The tax avoidance measure to send British sales out of the country to EU countries with lower tax rates such as Holland, Ireland and Luxembourg is also used by other tech giants such as Apple, Google and Amazon.

But Facebook said in December it was winding up its Irish holding firms, ending a financial set-up allowing Mark Zuckerberg's firm to shift billions in profits through Ireland largely untaxed.

How tech firms are doing during the Covid crisis and how much UK tax they paid

Facebook: Voice and video calls on Messenger and WhatsApp are at more than double usual levels. Facebook's UK arm paid £28million in corporation tax in 2018. It had pre-tax profits of £97million and revenues of £1.6billion. The company is trying to deal with coronavirus conspiracy theories and has given cash grants and advertising credits to thousands of small firms.

Amazon: The lockdown has caused a huge leap in online shopping but the company has been criticised  for an alleged lack of safety precautions at its warehouses. Amazon's UK division paid £14million in taxes in 2018, when it had a pre-tax profit of £75.4million and a turnover of £2.4billion. It is helping the NHS to predict where ventilators, hospital beds and medical staff will be most needed.

Google: Google searches of 'coronavirus' no longer show adverts, suggestions or links to profit-seeking sites. News, government sites, health services and approved advice on prevention are prioritised instead. It has pledged $800million to support small businesses. It paid £44million in corporation tax in 2019. The UK branch recorded £1.6billion in revenue.

Apple: Apple paid £3.8million in UK tax in 2018. It had £1.2billion in sales, and its pre-tax profits were £33.7million. The European Commission ruled that Apple's banking of European profits in Ireland is unlawful, and that it must pay £12.3billion in back taxes and interest.  Apple is collaborating with Google to add software to smartphones which would make it easier to use Bluetooth technology to track down people who may have been infected.

A Netflix spokesman said: 'We pay all the taxes required and are committed to paying an active role in supporting British production and creative talent for the long term.

'We are proud to be increasing our investment in the UK's creative industries, helping to create thousands of jobs and showcasing British storytelling and culture to the world.'

Campaigners from the Taxwatch thinktank believe that Neflix's international arm outside the US transferred up to £330million in taxable profits made in countries like the UK to low-tax jurisdictions such as the Netherlands, according to The Guardian.

Multiple UK lockdowns are expected to send its revenues through the £1billion barrier and is expected to lead to a bigger tax bill next year.

But this could be offset by the extraordinary $1billion budget set aside for original content including 50 shows such as The Crown, The Pope and Bridgerton. 

Technology firms including Facebook, Google, Apple and Amazon have pleaded that they should not have to pay a newly-imposed UK digital services tax. 

The 2 per cent tax came into force last March as the Government tries to clamp down on profits and cash being moved to countries with lower tax levels.

It will affect at least 30 firms with more than £500million of global revenues, but TechUK said it fears more companies will be caught by the tax than intended. 

The new levy will mean California-based Google alone will see 2 per cent of its £1.6billion sales in the UK taxed, bringing in an extra £32million for the Treasury.

Last Autumn retail giant Amazon will not by impacted by a new digital services tax - but traders who use the site will be, the HMRC revealed.

In June Rishi Sunak signed a letter alongside counterparts in France, Spain and Italy declaring that tech giants needed to 'pay their fair share of tax'.

But just seven months after the tax was announced in March, HMRC revealed Amazon, which paid £293million in taxes on sales of £13.73 billion, will not be affected by it, The Times reported.

The British Independent Retailers Association has voiced its own opposition, warning the tax has penalised smaller retailers while giving Amazon the edge.

Earlier this month Netflix users slammed the 'greed' of the streaming giant for hiking subscription fees by up to £24-a-year as the UK entered its third lockdown. 

The firm is increasing the price of its standard package - which allows two screens to access an account, as well as HD - by £1 per month, from £8.99 to £9.99.

The premium package - providing four-screen access per account and Ultra HD - is bumped up by £2, from £11.99 to £13.99.

Netflix said the price hikes are essential to reflect the 'significant investments' it has made in new TV shows and films. 

However, the move has angered many, with users rushing to vent their frustration on social media.  

One wrote: 'Here we go Netflix getting greedy will only lose subscription. Price hike in the UK is not the answer in these COVID times'

Another said: 'The nerve of Netflix to increase the monthly price when they still don't have all the Harry Potter films on there'

A third questioned the move, asking: 'Netflix is now going up in price? Why? They'd have made a killing already last year'

Another said: 'Netflix can go take a hike as I'm not paying any more. @NetflixUK you should be ashamed! We are in the midst of national lockdown and you are coining in on that!'

A fifth said: 'Thanks for the price hike @netflix great timing #lockdown'

THE HISTORY OF NETFLIX PRICE HIKES

May 2014: Netflix announced an increase in its monthly fee for streaming movies and television shows from £5.99 to £6.99.

The price hike was immediate for new subscribers but was delayed for two years for its existing members. 

But Netflix allowed subscribers to keep paying £5.99 a month if they opt for a lower-resolution 'SD' quality service.

May 2016: Netflix raises its monthly price for UK basic users from £5.99 to £7.49 a month.

A similar price change took place for US customers, who saw their subscription fee increase by $2 (around £1.40 at the time). 

Anyone who signed up to Netflix when it launched in Britain would have received the standard package for £5.99 per month.

But in an email to subscribers Netflix wrote: 'When we raised prices for new Netflix members in 2014, we kept your price the same for two years. Your special pricing is now ending and your new price will be £7.49 per month.'

October 2017: The company raised prices in both the UK and US for the first time in two years.

The standard package price increase by 50p to £7.99 per month.

The premium packagejumped to £9.99 a month, an increase of £1.

Netflix said at the time that the price change reflected the additional content added to its service.

May 2019: Netflix confirms that British customers will see the price of the standard tarriff increase from £7.99 to £8.99.

The premium tarriff was also bumped up by £2 to £11.99.

January 2021: Netflix hikes subscription fees for UK users as the country entered its third lockdown amid the coronavirus pandemic.

The standard package - which allows two screens to access an account, as well as HD - was raised by £1 per month, from £8.99 to £9.99.

The premium package - providing four-screen access per account and Ultra HD - is bumped up by £2, from £11.99 to £13.99. 

One wrote: 'Here we go Netflix getting greedy will only lose subscription. Price hike in the UK is not the answer in these COVID times'.

Another said: 'The nerve of Netflix to increase the monthly price when they still don't have all the Harry Potter films on there.'

A third questioned the move, asking: 'Netflix is now going up in price? Why? They'd have made a killing already last year'.

Another said: 'Netflix can go take a hike as I'm not paying any more. @NetflixUK you should be ashamed! We are in the midst of national lockdown and you are coining in on that!' 

A fifth said: 'Thanks for the price hike @netflix great timing #lockdown'. 

Those concerns were echoed by Uswitch.com's streaming and TV expert, Nick Baker.

He said: 'Netflix has been a lifeline for many people during lockdown, so this price rise is an unwanted extra expense for households feeling the financial pressure.

'It's unfortunate timing that this price hike coincides with another national lockdown, when all of us will be streaming more television and films than ever.

'During the first lockdown, the amount of streaming content watched by consumers rose a third on the previous year, and our viewing habits are likely to increase similarly this time.

'It's worth remembering that if you feel you aren't getting value for money from your subscription you can cancel penalty free whenever you want.'  

Netflix's one-screen non-HD basic plan will remain at £5.99 per month.

The streaming giant began raising subscription costs for new members in December.

Existing customers will be notified by email and will also receive a notification within the Netflix website and app a month ahead of their price change, based on their billing cycle.

'This year we're spending over one billion dollars in the UK on new, locally made films, series and documentaries, helping to create thousands of jobs and showcasing British storytelling at its best - with everything from The Crown to Sex Education and Top Boy, plus many, many more,' a Netflix spokesperson said.

'Our price change reflects the significant investments we've made in new TV shows and films, as well as improvements to our product.

'Our basic membership will remain at the same price, ensuring as many people as possible can enjoy our content.'

Football news:

Ole Gunnar Solskjaer: Manchester United don't get a penalty after a month or two ago there was a fuss about it. Coaches influence referees
Klopp on 2:0 Sheffield: Many have written off from the accounts of Liverpool. We need to win, we can't get to the Champions League without it
Milan scored their 15th penalty of the season in Serie A - the most in the league. Before the record-three 11-meter
Liverpool scored 7,000 th goal in the top division of England - only Everton has more
Manchester United have 0 wins and 1 goal in 7 matches against the big six this season in the Premier League
The Hudson-Odoi hand show: Maguire said the umpires were told it was a penalty. VAR baffled us
Jota misses the match with Sheffield due to illness, Alisson-due to the death of his father