US internet giant Google, which has been accused of not paying its full share of tax in numerous European countries, agreed a deal with Her Majesty’s Revenue and Customs (HMRC) on Friday.

The agreement, which comes after a six-year HMRC investigation into the tax affairs of several large corporations, will see Google pay back taxes stretching to 2005.

“We have agreed with HMRC a new approach for our UK taxes and will pay £130m, covering taxes since 2005,” a Google spokesman said. “We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business.

“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 and is in line with recent OECD guidance.”

The OECD has recently cracked down on companies that move profits between jurisdictions in a bid to reduce tax bills.

Google based its European headquarters in Ireland, which pays a lower rate of tax than if it was in the UK. Under the deal with HMRC, Google will report a larger amount of its sales in the UK. It will also pay more tax on those sales.

Google paid £20.4m in UK taxes in 2013 despite recording sales of £3.8bn.

Despite accusations from MPs that the firm doesn’t pay enough tax, Google has always maintained that it abides by the tax rules of every country it conducts business in.

“If we were British, we would make most of our profits in the UK and we’d be paying a lot more tax in the UK,” Matt Brittin, the head of Google Europe, told the BBC, which first reported the HMRC tax agreement.

“The facts are we are an American company and that is where we pay the majority of our taxes, that is where we make the majority of our profits.” (Daily Telegraph)

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