Google has struck a deal with Her Majesty's Revenue and Customs (HMRC) and will pay £130m in back taxes following a six-year enquiry into its accounts. Moving forward, it will also register a higher portion of its sales through its UK office, rather than Dublin.
However, the internet giant has stressed that this does not suggest it has avoided paying tax in the past.
Matt Brittin, head of Google Europe, told the BBC: “Today we announced that we are going to be paying more tax in the UK.
"The rules are changing internationally and the UK government is taking the lead in applying those rules so we'll be changing what we are doing here. We want to ensure that we pay the right amount of tax.
“We are making a change because we want to continue to comply with the rules and the rules are changing."
Google, which has its European headquarters in Ireland, paid £20.4m in taxes in 2013 despite generating sales – predominantly through its advertising business – in Britain amounting to some £3.8bn for the same period.
Google claimed at the time that its UK team is not engaged in advertising sales but simply provide marketing support to its Dublin office. However an investigation by The Drum revealed that 80 per cent of London media buyers dealt with the UK office when buying Google advertising while only 14 per cent said they used Dublin.
Google has today (23 January) promised to change its accounting system so that more sales are registered as coming through Britain, where corporation tax is higher.
The £130m it will pay HMRC covers the period between 2005 and 2015.
"We are paying £130m in respect of previous years when the rules were to pay in respect of profits you make in a country and then going forward we will also be paying in respect of sales to UK customers," explained Brittin.
Meanwhile, HMRC said: "Multinational companies must pay the tax that is due and we do not accept less."