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 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% increase in revenues last year, up from only £79m in 2020, after abandoning the widely criticised practice of funnelling British income through other lower-tax European jurisdictions that is commonly utilised by Silicon Valley companies.
The latest UK accounts mark the first time that Netflix has not accounted for the £1bn-plus it makes annually from the monthly fees paid by British subscribers through separate accounts at its European headquarters in the Netherlands.
The move to reallocate all revenues from its 13.8 million UK subscribers to its British subsidiaries in turn fuelled an almost tripling of pre-tax profits from £10.6m to £27.9m at Netflix Services UK, the main entity the streaming company has registered at Companies House.
Last year, Netflix paid almost £7m in UK corporation tax on total profits of £31.7m across the three businesses it has registered in the country, the most it has paid since launching in the UK in 2012. It is almost double the £4m paid in 2020.
In November 2020, Netflix, which reinvests a significant proportion of its revenues into a £1bn annual budget making TV shows and films in the UK, pledged to start declaring the income from British subscribers annually from 2021.
Last week it emerged that Facebook UK paid £29.8m in corporation tax, having made £3.3bn in gross revenues from advertisers. Google, which owns YouTube, paid £200m in tax; the research firm Insider Intelligence estimates the company made almost £8.7bn in ad revenue in the UK.
The latest Netflix accounts also show the scale of the expansion of the company’s UK operation, its largest production hub outside the US, with employee numbers increasing 44% to 396 last year.
The 153 employees at Netflix Services UK received average pay of £241,830 last year, as staff costs rose from £25m to £37m on the back of employee numbers growing from 108 in 2020.
Netflix Studios UK, which is responsible for shows 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 entity, Netflix Productions, employs only 18 people and had staff costs of £2.17m last year.
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Netflix UK used to receive a fee of almost €100m (£88m) for operating as the service arm for its European headquarters. The accounts show that Netflix UK paid a £50m dividend to its Dutch parent company in August this year.
A Netflix spokesperson said: “The UK has one of the world’s leading film and TV industries, that’s why we invest more in production here than anywhere outside North America. Last year we spent over $1bn, creating thousands of jobs and making world-class series and films across every corner of the country.
“We’re 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 like Bridgerton, The Witcher and Three-Body Problem.”
