Netflix paid a £4m UK Corporation Tax bill in 2020. Sounds enormous, doesn’t it? But some people are questioning if its proportional to their UK earnings.
How much does Netflix make in the UK?
The collective obsession with The Tiger King seems like such a long time ago now, but the various impacts of COVID-19 have increased the uptake of Netflix subscriptions enormously. In Britain alone, Netflix got two million more subscribers in 2020. Taking the total number of UK customers to 13 million and making the company around £1.15bn.
As an international company Netflix welcomed 36.6 million new subscribers, taking their global total beyond £200 million.
Netflix isn’t one entity, it’s divided up into a number of smaller companies. Three of these are under the Netflix UK banner and registered in the UK. These businesses declared revenues of £172m, with pre-tax profits of £19.4m. That’s a 43% revenue increase and a jump of 50% in profits. They pay Corporation Tax on their profit, not revenue.
Unfortunately for the Treasury, these Netflix UK businesses don’t include UK subscriptions. The monthly amounts we all pay, end up being declared in the Netherlands through Netflix’s European Headquarters. That’s £1bn that’s, quite legally, not liable for UK Corporation Tax.
International companies can set up financial systems that are the most tax efficient for them. Essentially, they choose the country where they’ll have to pay the least tax. It makes business sense to keep all costs as low as possible. It’s not just Netflix that do it. And they’re starting to make changes so that they pay more UK Corporation Tax.
Netflix investment in UK
It’s easy to get riled up at the thought of anyone ‘getting away with’ not paying their fair share of tax. We all have to, so why shouldn’t they. While this is true, it’s important to remember two things in this case:
- They aren’t doing anything illegal
- Netflix has also vastly expanded its UK production
What’s the second point got to do with anything? Well, Netflix invests a lot of money in making new British productions. £730 million every year, to be precise.
They’ve created a lot of Netflix Originals right here, including: The Crown, Top Boy, Sec Education and Bridgerton. And that means a lot of employment opportunities for British workers in the film and TV industry – everything from headlining actors and technical staff, to catering and transportation workers on each set. And they’re expect to directly employ 400 UK staff at their production hub, by the end of this year.
A Netflix spokesperson said: “Despite an incredibly tough year for the creative industry, the UK remains the most important producer of high-end film and TV in Europe.
“We are committed to playing an active role in the industry’s full recovery. As well as paying all taxes required, in the year ahead 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 up-skilling crew, training emerging British talent and spreading opportunity across the whole of the UK.”
What we can see here is money has been reinvested in the UK in a different way. It’s not direct Corporation Tax paid on profits, but its money going back into our economy. Not that it’s a case of investment or tax, but it’s worth noting that this isn’t a completely black and white situation. All this new investment also means that we can relax in the knowledge that we can’t actually ‘complete Netflix’.