Google will hand over £130m in back taxes to HMRC following an open audit of its accounts.
The agreement comes after accusations Google had been dodging tax responsibilities in the United Kingdom and not paying its fair share.
"Today we announced that we are going to be paying more tax in the UK," Google Europe boss Matt Brittin told the BBC.
"The rules are changing internationally and the UK government is taking the lead in applying those rules so we'll be changing what we are doing here.
"We want to ensure that we pay the right amount of tax."
The company has also revealed a change in how it reports its earnings going forward to ensure more sales are registered in Britain rather than funnelled through its headquarters in Ireland. This will mean the UK will receive larger proportions from Google in the future.
Brittin added: ”We are paying £130m in respect of previous years when the rules were to pay in respect of profits you make in a country and then going forward we will also be paying in respect of sales to UK customers.”
The decision comes following a six year HMRC investigation in to Google’s activity. The internet giant added it had not been avoiding paying the right amount of tax in the past, but simply following the rules that were in place at the time.
Britain said: "We were applying the rules as they were and that was then and now we are going to be applying the new rules, which means we will be paying more tax.”
Google’s actions come at a time of reckoning for US technology giants as the EU and sovereign governments investigate tax paying habits.
Back in December, Apple agreed to pay £234m in back taxes in Italy, while CEO Tim Cook is currently meeting with EU antitrust officials as a decision looms over its tax arrangements in Ireland.