After Starbucks, Facebook faces ire for dubious tax practices in UK

Facebook has become the latest multinational in UK to have its dubious tax affairs exposed after figures revealed it paid just £2.9 million in tax on profits of over £800 million.

According to filings for Facebook Ireland, through which all of the social network's profits outside the US are channelled, it paid the Irish tax authority £2.9 million last year.

The social network is so structured for tax, that companies advertising on its website in the UK or any other place outside the US have to pay Facebook Ireland.

Facebook Ireland was thus able to gross 2011 profits of £840 million – or £3.1 million for each of its 287 staff. Thanks to an accounting technique called "Double Irish", Facebook Ireland was able to cut its tax bill to just £2.9 million.

This enables multinationals to move huge sums of money to other subsidiaries in the form of royalty payments. Facebook transferred nearly £750 million to the Cayman Islands and its parent company in California in licensing and royalty payments.

Following the transfers, Facebook Ireland posted a £15 million annual loss, despite it accounting for 44 per cent of the social network's £1.95 billion revenues.