Netflix has revealed that it plans to start declaring its true UK revenue amid growing political pressure on the streamer and reports investigating its low tax bill.
“As Netflix continues to grow in the UK and in other international markets we want our corporate structure to reflect this footprint,” a Netflix spokesman told The Guardian. “So from next year, revenue generated in the UK will be recognised in the UK, and we will pay corporate income tax accordingly.”
Netflix’s UK holding company, Netflix Services UK, declared revenue of just €48M ($57M/£43M) in 2018 — its most recent UK earnings — despite the streamer having an estimated 10M British subscribers at the time.
That’s because Netflix’s British company provides services to Netherlands-based Netflix International, which ultimately collects revenue from UK subscribers.
Think-tank Tax Watch estimated that Netflix’s true 2018 revenue was actually likely to be around £860M, or $1.1BN — a figure that will have grown after its subscriber base has swelled to 13M, according to audience body Barb.
It’s difficult to say how higher revenue will translate into taxable profit. While profit is likely to increase, it’s a complex picture and Netflix’s international business has historically been lossmaking due to investment in technology and staff.
Netflix received a tax credit of €57,000 in 2018, with British lawmaker Dame Margaret Hodge accusing the company of a “superhighway robbery.” Hodge is a former chair of UK Parliament’s influential Public Accounts Committee.
Netflix’s revenue change will come into force in January and, according to The Guardian, the company will notify its UK customers about the decision. Separately, Netflix revealed this week that it will spend $1B on UK content this year.