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Facebook pays just £4,327 corporation tax in 2014.

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Comments

  • prowla
    prowla Posts: 13,717 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    So you are saying you would rather a company pay corporation tax at 20% than PAYE taxes on a bonus of around 60%...

    and dividends are out of taxed profits...
    Erm, no I'm not saying that.

    Yes, I mentioned dividends in response to a comment about the company having a duty to its shareholders; presumably they want to see a return on their investment...
  • WHA
    WHA Posts: 1,359 Forumite
    prowla wrote: »
    How can dividends or bonuses not be from profit?

    If the company does pay them and deliberately makes itself a loss, then it should be struck off.

    By law, dividends can only be paid from post-tax profits. Payment of a dividend doesn't affect the corporation tax paid on the company profits.

    Bonuses are a cost of the business and reduce the taxable profits. It is perfectly lawful for a business to pay all it's profits out as bonuses to staff thereby making no profit. The tax/NIC on those bonuses will be a lot more than if the company didn't pay the bonuses and paid corporation tax instead so a win-win for the country in which the workers reside.
  • antrobus
    antrobus Posts: 17,386 Forumite
    WHA wrote: »
    ...Bonuses are a cost of the business and reduce the taxable profits. It is perfectly lawful for a business to pay all it's profits out as bonuses to staff thereby making no profit. The tax/NIC on those bonuses will be a lot more than if the company didn't pay the bonuses and paid corporation tax instead so a win-win for the country in which the workers reside.

    John Lewis pays out bonuses to its staff and everyone thinks it's wonderful.

    Facebook pays out bonuses to its staff and everyone thinks it's tax avoidance.

    Go figure.
  • Tax has already been paid on the profits then distributed as bonus to JLP Partners, it's not a tax avoidance scheme.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    zappomatic wrote: »
    Tax has already been paid on the profits then distributed as bonus to JLP Partners, it's not a tax avoidance scheme.

    why do you say that?
  • CLAPTON wrote: »
    why do you say that?

    because he doesn't know tax law.

    http://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual%20reports/JLP-annual-report-and-accounts-2014.pdf

    JL effective tax rate pre partnership bonus is 7.5%
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    zappomatic wrote: »
    Tax has already been paid on the profits then distributed as bonus to JLP Partners, it's not a tax avoidance scheme.

    It may not be a tax avoidance scheme, but I'm afraid that you're very under-informed and bonuses are paid from profits *before* tax and this thereby reduces the corporation tax bill.

    Time for some headlines about JLP?
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    as zappomatic is a newish poster I add some explanation

    1. HMRC view (cash like) bonuses as simply pay

    so a person who earns say 40,000 with no bonus
    is taxed exactly like some-one paid 30,000 plus a 10,000 bonus

    2. and the treatment of the company tax is exactly the same in both situations too.
    (NI is slightly different as it's paid on a wage period basis instead of a yearly basis)

    3. it both cases wages are charges against profits and so reduce company tax.

    4. however there is a small exception
    for companies like JL i.e. partnerships, the government gives their employees a small exemption so they pay a little less tax (introduced in 2014 I think)


    So for two companies otherwise similar, the JL employees pay LESS tax than the others with 'normal' ownership and similar total earning.

    so start your boycott of JL now
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    gadgetmind wrote: »
    It may not be a tax avoidance scheme, but I'm afraid that you're very under-informed and bonuses are paid from profits *before* tax and this thereby reduces the corporation tax bill.

    Time for some headlines about JLP?

    There seems to be a lot of confusion about what is a pretty simple topic on this thread!

    As you imply, Corporation Tax is payable on profits thus any cost of the business reduces the Corporation Tax bill. A bonus for a staff member, buying stock, paying rent on premises are all costs and so are deducted from revenues in order to calculate the Corporation Tax bill.

    Paying Corporation Tax on turnover would be like paying income tax on the revenue you generate for the company you work for rather than your salary!

    The 'con' with companies like Facebook normally boils down to a scheme of some sort where the office in a high tax country pays what would be its profits in licencing fees to an office in a low or no tax country.
  • prowla
    prowla Posts: 13,717 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Generali wrote: »
    The 'con' with companies like Facebook normally boils down to a scheme of some sort where the office in a high tax country pays what would be its profits in licencing fees to an office in a low or no tax country.
    Correct, and is anybody on this thread disputing that it is highly suspicious that the "licencing" fees seem to have by some uncanny coincidence worked out to be such that the company, despite all of its employees meeting/exceeding their targets to achieve their bonuses, barely makes a profit?
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