PayPal tax bill jumps by £2.7m after review by HMRC

PayPal's UK subsidiary has agreed to pay an extra €3.1m (£2.7m) in tax following a review by HMRC.

Research by the BBC's Wake up to Money found that tax at the e-payments firm rose from €181,000 in 2016 to €4.7m.

In its newly-filed accounts, PayPal says: "HMRC has been reviewing the company's direct tax position.

"As a consequence, the company has agreed and settled its outstanding liabilities and as a result is not subject to any current enquiries."

Last week, Chancellor Philip Hammond raised the prospect of a new tax for large technology companies which have frequently been criticised for moving sales through other countries and paying modest amounts of tax in the UK.

The Organisation for Economic Co-operation and Development is trying to tackle the problem but is struggling to reach a consensus among its 36 members.

During his speech at the Conservative Party Conference, Mr Hammond said: "The time for talking is coming to an end. The stalling has to stop. If we cannot reach agreement the UK will go it alone with a 'Digital Services Tax' of its own."

Twitter UK has also filed accounts showing a jump in corporation tax from £815,000 in 2016 to £2.4m last year.

However, the company said this reflected an adjustment relating to previous years, rather than any involvement from HMRC.

Its UK profits fell 3.7% to £2.5m on revenue 2.5% lower at £77.4m.

Profit rise

PayPal UK books revenues from the services it provides to other group companies rather than income from UK transactions.

The division saw revenue rise by 8% to €36.7m last year, while pre-tax profit jumped to €7.8m from €1.2m.

The extra tax was covered by a €4.5m payment from an "affiliated entity".

During the same year, its parent company PayPal Inc, which is listed on the Nasdaq stock exchange in New York, reported revenues of $13bn and pre-tax income of $2.2bn.

It did not give a breakdown for the UK or Europe.

In response to the Paypal tax review, an HMRC spokesman said: "We do not comment on identifiable taxpayers.

"We make sure that large businesses, just like everyone else, pay all the taxes due under UK law and we don't settle for less."

A spokesman for PayPal Europe, Middle East and Africa declined to comment.