Paypal’s UK subsidiary has agreed to pay an extra £2.7m in tax after its financial arrangements came under scrutiny from HMRC.
The company’s filing showed its tax bill increased to €4.7m (£4.13m) in 2017, up from €181,000 (£159,000) the previous year.
The news comes as the Treasury plans to introduce a new tax on advertising revenue for technology businesses in the UK, a move that Chancellor Philip Hammond hopes will spare UK start-ups and instead mainly affect US businesses.
Paypal said that the increase was a result of HM Revenue & Customs reviewing its tax position.
“This Review is now complete. As a consequence, the company has agreed and settled its outstanding liabilities and as a result is not subject to any current enquiries.”
Paypal’s UK subsidiary doesn’t record income from UK transactions, and instead reports sales to other group firms. Its revenue increased by 8pc to €36.7m (£32.2m) in 2017 and pre-tax profit rose to €7.8m (£6.8m) from €1.2m (£1m) in 2016.
Globally, PayPal reported revenues of $13bn (£9.9bn) and pre-tax income of $2.2bn (£1.9bn) in 2017 but didn’t give a breakdown for the UK or Europe.
The Treasury is currently drafting plans for a new digital tax, mooted in a speech to the Conservative Party Conference, that could target the revenues US tech giants generate from advertising in the UK.