Facebook only paid £2.9m tax on £840m profit outside the US

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Facebook is the latest firm to reveal its UK tax figures - with accounts showing that the firm only paid £2.9 million tax on £840 million profit outside the US.

The figures also showed that in 2011 the firm only paid £238,000 corporation tax to the UK taxman.

The social network giant is the latest in a list of companies including Starbucks and Amazon to be put under the microscope in regards to its tax practices.

Facebook allows companies to use the platform for Internet marketing by selling advertising to them to use in their social media marketing campaigns. Display advertising is prominent on Facebook, but firms can use the platforms variety of marketing software to target specific audiences and also analyse conversion rates.

The firm is set up so the profit (£840m last year) from outside of the US, all goes through Facebook Ireland: for Facebook Ireland this represents a profit of £3.1m for each of its 287 staff.

To pay the low figure, Facebook used an accounting system known as "double Irish", using this system the firm was then allowed to move profits elsewhere in the form of royalty payments.

The firm then shifted £750m to the Cayman Islands and also its head offices in California via these licensing and royalty payments.

Ironically, this then led Facebook Ireland to post figures of a £15m loss - despite the fact that on paper,  it made almost half (44%) of the companies entire profit for the year ($3.15bn).

A Facebook spokeswoman defended the low level of tax the firm paid.

She said: "Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation."

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