Does Amazon pay tax? UK division received tax credit, but firm paid more than £700 million overall

Online giant Amazon has revealed it paid £781 million in direct taxes in the UK last year across the entire group, a jump of more than £130 million from the prior year, as it continued its rapid expansion across the nation.

However, the company’s principal UK division paid no corporation tax and in fact received a tax credit worth more than £7 million last year, benefiting from a deduction introduced by Rishi Sunak when he was Chancellor.

As a huge corporation with many different arms, Amazon’s UK operations are split between a number of different companies. There are also different forms of taxation, aside from corporation tax, which the Amazon group pays.

Tax campaigners have criticised Amazon for a lack of transparency, saying its approach to taxation allows it to “unfairly undercut local businesses”. Workers at an Amazon warehouse in Coventry organised under the GMB trade union have taken action over pay and conditions for the first time ever in the UK this year.

Did Amazon pay tax in the UK last year?

Amazon said it invested more and generated higher revenues in 2022. It benefited from a surge in demand for online deliveries during the pandemic, ramping up its operations and going on a recruitment drive to cope with more customer orders.

The direct taxes the firm must pay includes business rates, corporation tax and employer national insurance. The bill rose to £781 million from £648 million in 2021.

Including indirect taxes like VAT, Amazon said it paid more than £3.6 billion in total contributions last year, a huge jump from the £2.7 billion paid the prior year.

At the same time, Amazon’s revenues surged to a new record high of £24 billion, an increase of £1 billion year-on-year. The business has invested more in infrastructure as it continues its growth across the UK.

More than £1.6 billion was spent on investments including fitting warehouses with the latest robotics technology, and opening a new development centre in Swansea in Wales.

But the firm’s main UK division paid no corporation tax last year, or the year before, due to a deduction which allows companies to offset 130% of investment spending on plant and machinery against profits.

Accounts seen by The Guardian show the company received a tax credit of £7.7 million last year and £1.13 million in 2021. As a result of the scheme, Amazon UK Services paid no corporation tax, although other parts of the business did pay an undisclosed amount.

Amazon’s operations in Britain are split across a number of different companies, with Amazon UK Services being the primary employer of the group’s staff here, with more than half of its 75,000 workforce on its books.

Across the entire group, Amazon paid a number of different direct taxes in the UK, including corporation tax, but the main UK subsidiary did not pay corporation tax as a result of the deduction.

Corporation tax is a levy paid on profits, which for companies with profits of £250,000 or more, was set at 19% in 2022 and rose to 25% in April this year. Smaller companies, with profits of less than £50,000, have maintained the 19% rate.

The amount of profit which a company pays corporation tax on differs for companies based in the UK, which pay the levy on all profits generated here or abroad, or companies not based in the UK but with a branch or office here, which must only pay the tax on profits from its UK activities.

Paul Monaghan, the chief executive of the Fair Tax Foundation, told The Guardian: “Over the last decade, Amazon has grown its market domination across the globe on the back of income that is largely untaxed – allowing it to unfairly undercut local businesses that take a more responsible approach”.

“We now have a situation where Amazon UK Services is not only not paying tax, but is being handed tax credits for investment that almost certainly would have happened anyway. Tax credits for old rope, if you will. These super-deductions have not only wiped out the corporation charge for the last two years but will likely do so again in 2023 and possibly 2024”.

An Amazon spokesperson said: “Amazon UK Services is only a small part of our business, and when you look across all our UK companies we paid corporation tax last year. The reduction in tax for Amazon UK Services specifically is a result of our significant capital investments in the UK”.