Twitter’s (TWTR) profits in the UK surged last year as more advertisers flocked to the platform, but the company’s tax bill fell due to an increase in share awards to employees.
Profits at Twitter UK, the US social media company’s British subsidiary, leapt by 800% to £3.6m ($4.4m) in 2018, accounts filed with Companies House this week show.
Revenue rose by 33% to £103.4m. Twitter said in its accounts that most revenues come from advertising on the platform.
Despite the rise in profits and revenues, Twitter’s UK tax bill fell from £2.4m in 2017 to just £41,000 last year.
The decline was down to the use of deferred tax credits built up in prior years, timing adjustments, and a rise in share-based payments to staff. Share-based compensation at Twitter UK rose from £7.9m to £8.4m.
Employee share award schemes can give companies tax breaks if their public share price rises above the share price set in the scheme.
Staff typically sign up to share award schemes that pay over time. The price of the shares available to staff is set at the start of the scheme and if the company’s share price rises in the meantime, then the business is entitled to a tax break. This is because the company is notionally losing money by handing out the shares at the lower price.
Twitter has two share award schemes, set up in 2007 and 2013. Both grant stock after four years to eligible employees.
Twitter’s share price rallied over 50% across 2018, helping to explain the discount. Accounts show share based payments reduced Twitter’s UK tax bill by £881,000 last year, which would have wiped out the company’s entire corporation tax bill if not for other adjustments.
Twitter UK’s accounts show headcount rose from 174 to 192 people last year and staffing costs rose from £20.2m to £23m.
Twitter UK wrote that the business was progressing well but warned that Brexit could “adversely impact” the company due to potential “economic and political uncertainty and complexity.”
Twitter was not immediately available for comment.
Employee share schemes are widely used by tech companies as a way to reward staff. Amazon’s UK tax bill was adjusted down by £17.5m last year due to share awards and Facebook’s tax liability was reduced by £6m in 2017 for the same reason.
However, the relatively-small tax bills of tech giants in the UK has been a constant source of controversy. Earlier this month, Amazon was accused of paying “diddly squat” tax in the UK last year.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.