Netflix, the US streaming service with hits including The Crown and Stranger Things, has revealed its annual revenue from UK subscribers for the first time – £1.4bn. GBP in 2021 – after changing its accounting practices in a move that also resulted in a big increase in its corporation tax payment to almost £7m.
Netflix’s main UK business reported a 1,630% rise in revenue last year, up from just £79m. in 2020, after giving up widely criticized practice of channeling British income through other lower tax European jurisdictions commonly used by Silicon Valley companies.
The latest UK accounts mark the first time that Netflix has not accounted for the plus 1bn. pounds, which it earns annually from the monthly fees paid by UK subscribers through separate accounts at its European headquarters in the Netherlands.
The move to redistribute all revenue from its 13.8 million UK subscribers to its UK subsidiaries, in turn, led to a near tripling of pre-tax profits from £10.6m. GBP to 27.9 million GBP at Netflix Services UK, the main entity registered by the streaming company at Companies House.
Last year, Netflix paid almost 7 million GBP in British corporation tax from a total profit of 31.7 million. GBP across the three companies it has registered in the country, the most it has paid since launching in the UK in 2012. That’s almost double the £4m paid in 2020.
In November 2020, Netflix, which reinvests a significant portion of its revenue in an annual budget of £1bn, pledged to make TV shows and movies in the UK, to start declaring income from UK subscribers annually from 2021.
It came out last week Facebook UK paid £29.8m in corporation tax, having earned £3.3 billion in gross revenue from advertisers. Google, which owns YouTube, paid £200 million in tax; research firm Insider Intelligence estimated that the company earned nearly £8.7 billion in UK ad revenue.
The latest Netflix accounts also show the extent of the expansion of the company’s UK operations, its biggest production hub outside the US, with headcount rising 44% to 396 last year.
The 153 employees at Netflix Services UK received an average salary of £241,830 last year as staff costs rose from £25m to £37m on the back of headcount growing from 108 in 2020.
Netflix Studios UK, which is responsible for programs made in-house, increased its headcount from 160 to 225. The £59.5m in staff costs equates to an average salary of £264,000. The third unit, Netflix Productions, employs just 18 people and had staff costs of £2.17m. last year.
Netflix UK used to receive a fee of almost €100m. (£88m) to act as the services arm of its European headquarters. The accounts show that Netflix UK paid £50m in dividends to its Dutch parent company in August this year.
A Netflix spokesman said: “The UK has one of the world’s leading film and television industries, which is why we invest more in production here than anywhere outside North America. Last year we spent over $1bn on to create thousands of jobs and make world-class series and films in every corner of the country.
“We are committed to investing in the UK’s creative community, bridging the skills gap and creating high-quality jobs on some of our biggest global hits such as Bridgerton, The Witcher and Three-Body Problem.”