Facebook accused of 'dodging tax' by using loophole to channel cash through Cayman Islands haven

It used Irish office to avoid UK tax liability on earnings from British business

Less than £240,000 was paid to the UK taxman



Money was routed from Ireland into Cayman Islands subsidiary

Facebook channelled profits through a series of tax havens in order to pay just £2.9m of corporation tax on more than £800m of overseas profits in 2011, it has been reported.

Like Google and Apple the social networking site is said to have used its headquarters in Ireland to avoid tax liabilities in the UK before directing earnings to a subsidiary in the Cayman Islands.

British companies that buy advertising on Facebook must do so via Facebook Ireland Ltd which entitles the company to sidestep HM Revenue and Customs and authorities in other higher-tax jurisdictions, reported the Sunday Times today.

Under the spotlight: Mark Zuckerberg's (pictured) Facebook last year funnelled earnings into the Cayman Islands via Ireland in order to pay only a fraction in tax on more than £800million of overseas profits

As a result less than £240,000 was paid to the UK taxman.

The Dublin office, with a staff of 400 people showed a gross profit of £840million in 2011.

Despite this, Facebook Ireland posted a loss of £15million for the year after hundreds of millions were routed to a subsidiary in the Cayman Islands and to its parent company in the U.S.

Labour MP John Mann recently spoke out about the company's actions, calling them 'disingenuous and immoral'.



'They benefit enormously from the country's internet infrastructure but do nothing to fund it. It's like driving a car with no tax. We would stand for it on our roads so why stand for it on the net?,' he said.



Accounts for Facebook Ireland revealed that last year £440m was moved into an Irish sister company before being diverted to a subsidiary company in the Cayman Islands.



A spokesman for Facebook defended its accountancy and said it complied with all relevant regulations and was acting within the legal bounds of taxation.

'Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation,' he said.

'We have our international headquarters in Ireland that employs over four hundred people and a series of smaller local offices providing support services all over Europe.



Dublin was selected as the best location to hire staff with the right skills to run a multi-lingual hi-tech operation serving the whole of Europe.'



Facebook reported £620million in worldwide profit last year, 44 per cent of this came from outside the U.S.

The news comes in the wake of similar behaviour from other multinational companies like Starbucks and Google who use loopholes to avoid taxes.

Storm in a coffee cup: Protesters are now planing 'creative direct action' against the company

It will renew pressure on the Government to close the loopholes that allowed the companies to escape making any contributions to Treasury coffers through corporation tax –despite raking in billions of pounds in sales.



Starbucks coffee chain is facing a boycott by thousands of customers who are angry over revelations that it has paid just £8.6million in corporation tax in its 14 years of trading in the UK and nothing in the last three.

Outraged protest groups have promised ‘direct action’ against the coffee giant and threatened to try to close some branches.

Internet giant Google avoided tax on £10billion revenue last year by doubling the amount of money put into a shell company in Bermuda.



Google's decision to move nearly 80 per cent of its pre-tax profits to the company, which is not subject to corporation tax on the Atlantic island, saw the company slash its overall tax rate almost in half - avoiding more than £1billion in payments.

Chancellor George Osborne pledged to wage war on multinational companies paying little or no tax.



In his Autumn Statement, he said he would give HM Revenue and Customs a further £77million to fight tax avoidance by wealthy individuals and global firms.

News of the American company's latest legal attempt to avoid paying high levels of tax comes after MPs recently criticised firms including Google, who they claim are 'immorally' minimising tax bills.

Earlier this year Facebook floated $104billion of shares in a initial public offering (IPO) .

Anger: Web giant Google avoided paying $2billion in tax last year by moving around 80 per cent of its overseas profits to a company in the tax haven of Bermuda

But the much-hyped flotation fell flat by the closing bell, finishing at only 23 cents more than its expected opening price.

Some market experts blamed trading problems and an anxiety-filled half hour where traders were having problems placing and cancelling orders for Facebook stocks.

Meanwhile, Zuckerberg – who owns 503.6million shares in his company – is worth an estimated $19.25billion and has become one of the wealthiest people in the world in a single day.

Zuckerberg, pictured here at Facebook's flotation earlier this year, is worth an estimated $19.25billion and became one of the wealthiest people in the world when the company went public