Amazon UK Services Limited, the online retailer's core UK branch that includes the firm's network of warehouses, was awarded a tax credit of just over £1 million last year by HM Revenue and Customs - even though the company's profits rose almost 60 per cent.
The tax break was a part of €1 billion in tax credits that European nations gave to Amazon EU Sarl, the US company's Luxembourg-based division. This was a significant rise from the €56 million in tax advantages Amazon's European branch received a year earlier.
Amazon UK Services increased its revenue by more than £1 billion last year, from £4.9 billion to about £6.1 billion. The company's profits also skyrocketed 59 per cent, reaching a total of £204 million. Total income for all UK operations came to £23.2 billion.
Amazon denies that it received a tax break in the UK. It explains that it took back £1 million of the £18.3 million it had put aside to cover its corporation tax payment in 2020, resulting in the credit.
Amazon UK Services completely wiped out its entire tax liability by using former Chancellor and current Tory leadership contender Rishi Sunak's 'super deduction' scheme.
The programme, introduced last year, enables businesses to deduct 130% of investment expenditure on qualifying plants and machinery against profits for a period of two years, starting in April 2021.
Amazon used the sceme to claim a rebate on its prior-year tax payment of £18.3 million in 2020 and had no further tax obligations in 2021. It was able to put the savings towards four new 'fulfilment centres'.
'The Government uses the taxation system to actively encourage companies to make investments in infrastructure and job creation. We invested more than £11.4bn in the UK, creating more than 25,000 jobs,' Amazon said.
Amazon says its 'direct taxes' totalled £648 million in the UK in 2021, an increase from £492 million the previous year.
However, 'direct taxes' include an employer's national insurance contributions, corporation tax, business rates, stamp duty land tax, import duties, and the digital services tax.
Amazon does not provide a breakdown of the amount of corporate tax it pays for its UK operations as a whole. It insists that focusing on just one part of its taxes does not convey the complete picture.
Trade union Unite found that Amazon reported up to £8.2 billion of its UK sales in Luxembourg in 2019, to avoid paying higher UK rates. The report claimed that Amazon declared £13.7 billion of UK sales in its US accounts, and just £5.5 billion for its UK-based firms.
Amazon rejected the report and said the discrepancy was because most of its sales to UK shoppers were booked by UK branches of one of its Luxembourg companies.