Under Rishi Sunak’s super-deduction scheme, Amazon UK Services received a tax credit of £7.7m for their infrastructure investment
For the second consecutive year, Amazon’s main UK division has avoided paying corporation tax. This has been made possible by utilizing tax credits received on a portion of its £1.6bn investment in infrastructure, which includes robotic equipment at its warehouses. Amazon UK Services, responsible for employing over half of the group’s UK workforce, received a tax credit of £7.7m during the year ending in December, as revealed in the accounts submitted to Companies House. These details were provided by Amazon to The Guardian in advance. The government’s “super-deduction” scheme, introduced by former Chancellor Rishi Sunak, enabled businesses to offset 130% of investment spending on plant and machinery against profits for two years starting from April 2021. In 2021, Amazon recorded a credit of £1.13m under this scheme.
While other segments of Amazon’s UK business paid an undisclosed amount of corporation tax, it is understood that the main division of Amazon UK did not pay any. In 2022, the main division experienced a pre-tax profit increase of approximately 9% to nearly £222m, driven by a sales growth of almost 8% to £6.56bn. The lack of transparency regarding Amazon’s total profits in the UK and the corresponding amount of corporation tax paid has drawn criticism from tax justice campaigners, shareholders, and Paul Monaghan, the CEO of the Fair Tax Foundation.
According to an Amazon spokesperson, the corporation tax paid by Amazon UK Services should be viewed in the context of the company’s overall operations. While Amazon UK Services represents a small portion of their business, the spokesperson stated that when considering all their UK entities, they did pay corporation tax in the previous year. The specific reduction in tax for Amazon UK Services is attributed to their substantial capital investments made in the UK.
As Amazon revealed that its workforce remained at 75,000 in 2022, the details of the company’s tax benefits came to light. The employee count had experienced significant growth, nearly tripling from around 27,500 in 2018, thanks to the addition of 10,000 new roles annually in both 2021 and 2020.
However, like other digital players, Amazon has been implementing cost-cutting measures due to the decline in online spending since the peak of the pandemic. With the reopening of high streets and the easing of restrictions on socializing and office work, the demand for online services has decreased.
In January, the company announced the closure of three out of its 30-plus warehouses in the UK, along with seven small delivery sites, resulting in more than 1,300 job losses. As part of these efforts, the online bookseller Book Depository was also closed down in April.
Amazon stated that it made a significant investment of £12bn in the UK during the previous year. This included £1.6bn allocated to infrastructure development, such as the integration of additional robotics in their warehouses, as well as the establishment of 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 experienced a growth of over £1bn, surpassing 4%, reaching a total of £24bn in the same period. Based on the company’s filings in the United States, this figure positions Amazon’s UK operations as larger than Asda, the third-largest supermarket in the UK, and approximately twice the size of Marks & Spencer.
Accounts for Amazon’s retail division based in Luxembourg, published in March, reveal that the UK tax credit received by Amazon UK Services was part of a total of €937m (£805m) in tax credits across Europe in the previous year. This follows slightly over €1bn in benefits received the year prior.
The tax credits were granted to Amazon EU Sarl, which encompasses the company’s retail interests in the UK, Germany, Spain, Italy, and other EU countries. Notably, Amazon EU Sarl experienced a significant increase in losses, more than doubling to €4.3bn from €2.1bn in the preceding year. Sales also slightly declined to €50.9bn from €51.3bn in the same period.
In response, Amazon clarified that the revenues, profits, and taxes for the majority of its UK operations were accurately recorded and paid in the UK. The company emphasized that its retail and Amazon Web Services (AWS) revenues, which constitute the largest portion of its business, are attributed to Amazon EU Sarl and AWS EMEA Sarl. Both entities maintain a branch in the UK, ensuring that the UK’s revenues, expenses, profits, and taxes are appropriately recorded within the country and directly reported to HMRC (Her Majesty’s Revenue and Customs), as stated by Amazon in a formal statement.
