It follows a six-year probe by Britain’s HM Revenue and Customs (HMRC) in response to controversy over low taxes paid by multinational corporations which operate in Britain but have headquarters elsewhere.
“We have agreed with HMRC a new approach for our UK taxes and will pay £130 million, covering taxes since 2005,” a Google spokeswoman said.
“The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result. This settlement reflects that shift.”
In future, Google will pay taxes in Britain according to revenue from advertisers based in Britain, something that “reflects the size and scope of our UK business”, the spokeswoman said.
The BBC reported that Google would now register a greater proportion of its sales activity in Britain rather than Ireland, where its European headquarters is based and which has a lower rate of corporation tax.
An HMRC spokesman welcomed the agreement.
“The successful conclusion of HMRC inquiries has secured a substantial result, which means that Google will pay the full tax due in law on profits that belong in the UK,” the spokesman said.
“Multinational companies must pay the tax that is due and we do not accept less.”
Britain’s finance minister George Osborne has vowed to close tax loopholes and introduce a so-called “Google tax” to stop firms moving profits overseas.
Google is among several top technology firms under pressure over complex tax arrangements.
Apple agreed to pay Italy 318 million euros to settle a tax dispute last month, and in November world leaders of the Group of 20 top economies vowed to clamp down on schemes by multinationals to minimise tax.
The plan would force multinationals to pay tax in the country where their main business activity is based.
The OECD group of rich nations has estimated that national governments lose $100-240 billion (89-210 billion euros), or 4-10 percent of global tax revenues, every year because of the tax-minimising schemes of multinationals.