Spare a thought for Microsoft’s British tentacle. It reported surging local revenues for fiscal 2021 yet profits shrunk, according to financial accounts.
Documents filed at the UK’s Companies House show Microsoft’s revenues grew to £4.86bn for the year ended 30 June, up from £4.03bn for the same period in 2020. Profit after tax, however, was down 0.2 per cent to £169.4m.
Paying the tax inspectors a bit more this time may have contributed to the bottom line slip – Microsoft registered £51.5m tax on profits of £220.5m in 2021 compared to £43.5m on £212.9m in 2020.
The company split its revenues into “Product” (items such as Intelligent Cloud and the like) and a more nebulous “Services and others.” The former grew more than 3 per cent to £1.63bn, and the latter jumped 31 per cent to £3.23bn. The company put the reason for the increases as simple business growth.
Corporation tax was little changed, standing at £41.9m and £40.5m respectively.) However, in 2021 the effect of employees exercising share options turned a £1.7m credit into a £1.1m expense and deferred tax relating to changes in tax rates and laws turned a £733,000 credit into a £3.6m expense.
All of which made the total tax charge £51.5m for 2021 versus £43.5m in 2020.
A dividend of £17,000 per each ordinary share was paid, equating to a total expense of £255m. Microsoft UK paid no dividend in 2020.
Headcount for the year increased from 3,491 to 3,969. Return on employee investment was 35 percent in 2021 (up from 33 percent in 2020.)
“This is calculated as a percent of total profit for the year divided by employee costs, excluding share-based payment expenses,” the accounts state.
Microsoft also noted an increase in the UK corporation tax rate from 19 percent to 25 percent – which is effective as of 1 April next year, and adjusted its deferred tax accordingly, from a tax credit of £733,000 to an expense of £3.609 million.
With prices for the Microsoft’s wares on the increase, customers would be forgiven for eying those surging revenues with somewhat of a jaundiced eye. Even if a relatively small increase in tax payments has resulted in a very slight dip in profits after paying HMRC its dues.