Under Rishi Sunak’s super-deduction scheme, Amazon UK Services was granted a tax credit of £7.7m for investing in infrastructure.
For the second consecutive year, Amazon’s main UK division has avoided paying corporation tax by utilizing tax credits on a portion of its £1.6bn investment in infrastructure, including robotic equipment at its warehouses. Accounts filed at Companies House, with advance details provided by Amazon to The Guardian, reveal that Amazon UK Services, responsible for employing over half of the company’s UK workforce, received a tax credit of £7.7m in the year ending December.
Rishi Sunak, during his tenure as chancellor, implemented the government’s “super-deduction” scheme, which aimed to incentivize businesses investing in infrastructure. This scheme enabled companies to offset 130% of their investment expenditure on plant and machinery against profits for a two-year period starting from April 2021. Amazon took advantage of this scheme and recorded a credit of £1.13m in 2021.
It is believed that due to this, Amazon’s primary division in the UK did not pay any corporation tax, while other segments of the company’s UK operations did pay an undisclosed amount.
The main division’s pre-tax profits experienced an approximate 9% increase, reaching nearly £222m in 2022, fueled by an almost 8% rise in sales, totaling £6.56bn.
Paul Monaghan, the CEO of the Fair Tax Foundation, expressed criticism towards Amazon for their failure to disclose the overall profits generated in the UK and the corresponding amount of corporation tax paid. Despite appeals for increased transparency from tax justice advocates and shareholders, this information remains undisclosed.
Monaghan stated, “Throughout the past decade, Amazon has expanded its market dominance globally, largely relying on untaxed income, which enables them to unfairly undercut local businesses that adopt a more responsible approach.”
The current situation is such that Amazon UK Services not only avoids paying taxes but also receives tax credits for investments that would have likely been made regardless. These tax credits can be considered unnecessary incentives. These super-deductions have not only eliminated the corporation tax liability for the past two years but are also expected to do so in 2023 and potentially 2024.
An Amazon representative responded, stating that Amazon UK Services constitutes only a small portion of their overall business. They emphasized that when considering all their UK companies together, they did pay corporation tax last year. The reduction in tax for Amazon UK Services specifically is attributed to their substantial capital investments made in the UK.
Details regarding Amazon’s tax advantages have come to light as the online retailer and digital services provider disclosed that its workforce remained at a standstill with 75,000 employees in 2022. This follows a remarkable growth period, nearly tripling from approximately 27,500 in 2018 by adding 10,000 new positions annually in 2021 and 2020.
Due to the decline in online spending since the peak of the pandemic, which occurred during the reopening of high streets and the relaxation of restrictions on socializing and office work, Amazon and other digital companies have been implementing cost-cutting measures.
In January, the company announced its intention to close three out of its 30-plus warehouses in the UK, along with seven smaller delivery sites, impacting over 1,300 jobs. As part of these efforts, the Book Depository online bookseller was also shut down in April.
Nonetheless, Amazon stated that it had made a significant investment of £12bn in the UK during the previous year. This included £1.6bn allocated for infrastructure development, such as enhancing robotics technology in their warehouses, as well as establishing a software development center in Swansea for their Veeqo division, which offers online tools for sellers.
The group’s overall sales within its UK network increased by £1bn, representing a growth of over 4%, reaching a total of £24bn last year. This figure positions the company as larger than Asda, the UK’s third-largest supermarket chain, and approximately double the size of Marks & Spencer, as stated in the group’s filings in the United States.
Amazon reported paying a total of £781m in taxes in the UK, which includes business rates, employer’s national insurance contributions, and corporation tax. This amount represents an increase from £648m in the previous year.
The tax credit received by Amazon UK Services in the UK was a portion of the €937m (£805m) in tax credits granted throughout Europe last year. This information was disclosed in the accounts of the company’s retail division based in Luxembourg, which were published in March. The previous year, the group had received just over €1bn in benefits.
Amazon EU Sarl, encompassing the group’s retail interests in the UK, Germany, Spain, Italy, and other EU countries, experienced a significant increase in losses, more than doubling to €4.3bn compared to €2.1bn the previous year. This decline in sales resulted in a decrease from €51.3bn to €50.9bn.
Paul Monaghan criticized the situation, stating that income was being directed to Luxembourg, where the subsidiary generated substantial tax reliefs consistently. These reliefs are expected to be utilized in the future, ensuring minimal or no tax payment in Luxembourg.
However, Amazon countered these claims by asserting that the majority of its UK business’s revenues, profits, and taxes were accurately recorded and paid in the UK. The company explained that its retail and Amazon Web Services (AWS) revenues, which constitute a significant portion of its operations, are attributed to Amazon EU Sarl and AWS EMEA Sarl, both of which have a branch in the UK.