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INDUSTRY / MARKET UK / USA

Netflix to begin declaring its UK revenues to the tax authorities

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- The streaming giant has previously been funnelling UK profits into lower-tax jurisdictions, such as the Netherlands

Netflix to begin declaring its UK revenues to the tax authorities
Gillian Anderson as Margaret Thatcher in season 4 of the UK Netflix series The Crown

Netflix has announced that it will finally begin publicly declaring the large revenues – estimated at £1 billion – that it makes from its nearly 13 million UK subscribers. The change, scheduled to take effect in January next year, will greatly increase the amount it pays in UK corporation tax.

UK corporation tax is paid on profits, and not overall revenues, and Netflix is altering how it channels its revenue as it reviews local operations. For instance, the company has increased its investment in home-grown productions by up to $1 billion (£744.1 million) throughout 2020. This growth has been motivated by the global success of UK programming such as The Witcher, The Crown and Sex Education.

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“As Netflix continues to grow in the UK and in other international markets, we want our corporate structure to reflect this footprint,” a Netflix spokesperson said in a statement. “So from next year, revenue generated in the UK will be recognised in the UK, and we will pay corporate income tax accordingly.”

The think tank TaxWatch reports that the company has moved profits from the UK and other countries to its European headquarters in the Netherlands, known as Netflix International. Its declared revenue in the UK to date (previously derived from its holding company Netflix Services UK) has been out of kilter with its subscriber numbers, estimated to hit 14 million in 2021, which in turn would amount to £1.3 billion in revenue, according to analytics firm Ampere Analysis.

The move comes as Netflix has been mooting similar changes for its largest European territories, having announced last month that it would declare total revenues in France and Spain. This is just the latest development, with major US streaming services Netflix and Amazon still in wider negotiations with European countries, seeking to balance their success with benefit for the local independent industry.

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