Apple faces tax scrutiny in the UK

The Government is under pressure to launch a crackdown after it emerged Apple paid just £10m in British tax in 2010 despite clocking up sales here worth an estimated £6bn.

Apple CEO Tim Cook speaks during an event in San Francisco, Wednesday, March 7, 2012
Tax experts said they would be surprised if Her Majesty's Revenue & Customs did not look into the situation at Apple. Credit: Photo: AP

Accounts for the iPad maker's three main British subsidiaries show the Californian group paid just £10.3m in corporation tax in the year to September 25, 2010, according to reports. Apple's British turnover is thought to account for a tenth of worldwide sales, which hit $100bn (£63bn) in its last financial year. The US giant avoids paying higher taxes by using foreign subsidiaries, such as in Ireland and the British Virgin Islands.

The revelation comes less than a week after online retailer Amazon disclosed it was facing an investigation by British tax authorities over allegations it recorded almost £8bn of sales in Britain over the past three years without paying corporation tax.

Tax experts said they would be surprised if Her Majesty's Revenue & Customs did not look into the situation at Apple. The Chancellor pledged in last month's Budget to clamp down on "morally repugnant" tax dodging.

Chris Sanger, tax partner at Ernst & Young, said: "All multinationals will be having to justify themselves to the tax authorities to make sure they are paying the right amount of tax."

However, he said that establishing the right amount for multinationals like Apple was tricky when the intellectual property of products was based overseas.

"When the bulk of research and development, investment and innovation comes from the US, it's quite right the UK won't take its [tax] fill," he said, adding the Government should focus on encouraging investment in Britain so it can develop its own hugely valuable intellectual property.

Last year, Apple paid a tax rate of 24.2pc, lower than the 35pc level of corporation tax set in the US, possibly because it has been paying lower tax outside the country. The technology giant, which declined to comment, has more than $50bn of profits sitting outside the US as of September 30 last year.

An HMRC spokesman vowed to crack down on "unacceptable corporate structuring".