Netflix to Begin Declaring $1.7 Billion U.K Revenues to British Tax Authorities

Sex Education Still 2 - Publicity -H 2020
Courtesy of Netflix

'Sex Education'

The move could add further pressure to other tech giants who have funnelled money through overseas tax jurisdictions such as Holland and Ireland.

Netflix is to start declaring its U.K. revenues — forecast to reach £1.3 billion ($1.7 billion) next year, according to analysts — to British tax authorities.

The decision, which comes following similar realignments in France and Spain announced last week, will see British revenue subscriptions recognised — and therefore taxed — in the U.K. as of 2021 and will likely add further pressure on other tech giants like Google, Amazon and Facebook to stop directing revenues through overseas tax jurisdictions.

According to its latest financial filing, in 2018 Netflix made £700 million ($931 million) from its U.K. subscribers yet declared only 48 million Euros in revenues ($57 million), which it described as a services fee from its European headquarters in The Netherlands.

It's worth noting that in the U.K., corporation tax is paid on profits rather than revenues, so there are a number of factors that will determines Netflix's future tax bill. The company recently said that following the success of shows such as the The Crown and Sex Education it was ramping up spending on its U.K. productions by 50 percent, which will likely impact costs.

"The U.K. is a key country for Netflix and that’s why we’ve more than doubled our planned spend on UK content to over $1 billion this year, such is the strength of the creative sector and the depth of talent here," said a spokesperson.

"As Netflix continues to grow in the U.K. and in other countries - we want our corporate structure to reflect this footprint. So from next year, revenue generated in the U.K. will be recognised in the U.K., and we will pay corporate income tax accordingly."

According to Ampere Analysis, Netflix will reach 14 million U.K. subscribers in 2021.