Microsoft has been added to the list of companies operating within the UK that has used a legal loophole to avoid paying corporation tax. According to reports Microsoft avoids paying £159 million worth of tax every year, and is thought to have avoided tax on £1.7 billion of online sales in the UK.
Microsoft puts transactions through Luxembourg to sidestep any taxes it would normally have to pay, according to The Sunday Times. The Luxembourg HQ has a small number of staff who then transfer the royalties to Microsoft‘s European HQ in Ireland, with dividends being directed to the parent company in Bermuda.
Microsoft is the latest in a growing number using this method to avoid UK tax. Starbucks, Amazon, AOL and eBay have also reportedly been found to use similar techniques. While what they’re doing is legal it isn’t likely to sit well with UK taxpayers.
A spokesman from Microsoft said:
Microsoft pays all due taxes, as required by law, worldwide. Microsoft subsidiaries are fully subject to tax in the jurisdictions in which we operate. We are regularly audited by major tax jurisdictions, which ensure the company is complying with all rules and regulations.
Microsoft avoids paying £159 million UK tax every year.