Netflix is under investigation by the U.K.’s tax authority, according to a report by a British newspaper.
The Times of London reported Monday that Netflix’s British accounts were under scrutiny by government tax body HMRC (Her Majesty’s Revenue and Customs).
The most recent accounts for Netflix’s British arm showed its London office employed 14 people, the paper said. Netflix reportedly claimed the office only existed to provide support to its main European operation, which is registered in Amsterdam.
According to The Times’ calculations, Netflix generates around £863 million ($1.1 billion) from British users every year — but only declared revenues of £23.9 million in 2017, with a profit before tax of around £1.1 million. It was noted, however, that the company received an income tax credit of around £177,000 as an incentive to produce British films and television shows.
HMRC told CNBC via email that it could not comment on individual cases. However, a spokesperson said: “HMRC has a very strong track record on challenging contrived tax arrangements. We make sure that large businesses, just like everyone else, pay all the taxes due under U.K. law and we don’t settle for less. In 2017/18, HMRC secured over £9 billion in additional tax revenue from the largest and most complex businesses.”
HMRC actively investigates around 50 percent of the U.K.’s largest businesses at any one time. A spokesperson for Netflix was not immediately available for comment when contacted by CNBC.
U.S. digital giants like Netflix are looking set to face increasing scrutiny in Europe over their revenue declarations. In October, U.K. Finance Minister Philip Hammond announced a new digital services tax that would come into force from April 2020. The EU is also looking to introduce some form of digital tax, with French Finance Minister Bruno Le Maire saying he wants to see it in effect by the end of this year.
Read the full report on The Times’ website here.