Google has agreed to pay back taxes of STG130 million to the British government.

The US online search firm, which has faced severe criticism of its UK financial arrangements, said the payment covered back taxes since 2005.

Britain is one of Google's biggest markets outside the US, but the company has minimised its taxes in the country by keeping its European headquarters in Ireland, where tax rates are lower.

That tactic has spurred accusations that Google has been evading taxes.

Google says it will now base its British tax bill on UK advertising sales instead of just profit.