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The (Big) Google Deal: Let’s talk business

google_2015_logo_detailThe UK media has been more polarised than ever before, with right wing rags attempting to somewhat gloss over the recent deal between Chancellor George Osbourne and Google, and with left wing broad sheets positively ripping him, and the deal, apart.

Yet with austerity showing no signs of abating, and with other political winds still raging around the so-called bedroom tax and benefit reductions, this is one political hot potato that doesn’t seem ready to go away any time soon.

With all of this in mind here we get to grips with the deal, weighing up just what has lead to a tax payment of just £130m from a company that counts as one of the most profitable in the world.

 

The Google Deal: Getting to the crux of the matter

Let’s put things into perspective. The Google deal saw a payment of £130 million into the HRMC coffers. Whilst this figure sounds imposing, this payment pales in significance to the staggering £3 billion in revenue that Google gained explicitly from British trade over the past decade. That equates to just 2.77% of their profits. Compared to the standard 20% paid by not only SMEs, but also be every employee within the UK who exceed their personal allowance, this is a lowly rate in anyone’s book. Apart, it seems, from in Osbourne’s.

What’s more this payment hasn’t exactly been forthcoming, requiring an investigation that spanned several years and that, even today, may be subject to further (rather expensive) inquires.

 

So, for the SME, should this deal be seen as a slap in the face?

The legalities of Google gate

One argument pops up time and again. And was indeed the pivotal focus of Google’s statement and approach to all enquiries: and that is that their tax system is entirely legal, as the official line from Google HQ sets out itself:

“After a six-year audit by the tax authority we are paying the amount of tax that HMRC agrees we should pay.

Governments make tax law, the tax authorities enforce the law and Google complies with the law.”

Simple, right? However the effect upon an SME business owner such as yourself is likely one that ranges from sheer bewilderment as to just how such a small amount can be set upon, to the positively outraged. And with SMES taking the strain for the UK economy, accounting for £473 billion, or 49.8%, of GDP (House of Commons 2014) HRMC’s bread and butter tax contributors are left to face far more significant tax bills.

That all said for the ever under pressure SME that faces a tougher time than Google some light does come into the form of the Conservative’s pro-business stance. Under their governance there has been a significant focus upon the SME, their challenges and the various ways in which fledgling businesses can be nurtured to grow.

Of course, this does nothing for the range of taxes and charges that such businesses face. And who knows whether the Conservatives proposed ‘tough’ stance upon billion dollar industry companies avoiding tax will truly come into fruition.

Is it fair? Probably not. Does it emphasise the need for the right tax advice? Absolutely.

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