Netflix only paid £4m in UK corporation tax on £1.15bn of UK subscribers | netflix

Netflix only paid £4million in UK corporation tax in 2020, despite having its best year ever, as a pandemic-fueled viewing boom generated around £1.15billion sterling from its UK subscribers.

The streaming company, whose tax bill rose 33% year-on-year to the highest level since its UK launch in 2012, added a record 36.6 million new subscribers in the world, bringing its total to more than 200 million. In the UK, it added around 2 million subscribers, bringing its UK following to around 13 million people.

Netflix UK saw a 43% increase in revenue to £172m, with pre-tax profits rising 50% to £19.4m across the three businesses the US company has registered with Companies House. However, the £1 billion that Netflix earns each year from monthly fees paid by its UK fans is funneled through separate accounts at its European headquarters in the Netherlands.

Netflix is ​​working to abandon the practice, common among big tech companies but criticized as a tactic to shift bills to low-tax jurisdictions. In January, he began reporting UK income to UK tax authorities.

The impact of the move, which could mean the company pays more UK corporation tax, will not be clear until Netflix’s financial performance for this year is made public in 2022.

However, the tax bill is paid on profits, not revenues, and the company continues to reinvest at least half of the income it makes in the UK into its bloated budget for original UK productions. Netflix UK spends around $1bn (£730m) a year on UK productions including Bridgerton, The Crown, Top Boy, Sex Education and Aardman Animation’s upcoming film Robin Robin.

A spokesperson said: “Despite an incredibly difficult year for the creative industry, the UK remains the largest producer of premium film and TV in Europe.”

The accounts also show the scale of the company’s expansion in the UK, its largest production hub outside the US, with the number of employees rising from 29 in 2017 to 274 at the end. from last year. By the end of 2021, Netflix expects to employ around 400 people in the UK.

Employees at its biggest operation, Netflix Services UK, received an average salary of €239,000 (about £203,000) last year, up from €287,000 in 2019, as the big salaries paid to relatively few senior executives are countered by the growth of the workforce.

Last month, the company paid hundreds of millions of dollars to buy the rights to the works of Roald Dahl, author of classics such as BFG and James and the Giant Peach, as part of its biggest content deal yet. day.

Netflix has expanded its production capacity in the UK, its largest base outside the US, by recently signing a long-term lease at Longcross Studios, used by productions such as Skyfall, War Horse and Call the Midwife. He already has a long-term contract with Shepperton Studios, which houses films from Alien to Mary Poppins Returns. Both studios are in Surrey.

The decision to report UK income also means that Netflix UK will have to start paying service fees to the Dutch headquarters. In 2020, Netflix UK Services received a royalty of almost €100 million to operate as a service arm of its European headquarters.

The spokesperson said: “We are committed to playing an active role in the full recovery of the industry. As well as paying all required taxes, over the coming year we will continue to invest in production facilities and increase our content budget to include over 60 UK productions. And through our new Grow Creative UK initiative, we will focus on improving team skills, nurturing emerging UK talent and spreading opportunities across the UK.

Netflix has pledged £1.2m to the initiative, which aims to develop the careers of 1,000 people in the film and TV industry.