Amazon could be off the hook for tax in the UK for at least two more years after benefiting from reliefs brought in by Rishi Sunak during the pandemic, a report suggests.
The research from the Fair Tax Foundation indicates that the US tech company claimed more than £800m in capital allowances – business expenses that can be offset against profits – in 2021, £500m more than in 2020.
The value of these allowances was boosted largely thanks to the “super-deduction” scheme for businesses that invest in infrastructure, which was introduced by the current prime ministerial candidate Sunak when he was chancellor last year.
Under the scheme, from 1 April 2021 until 31 March 2023, companies are able to claim allowances equivalent to 30% more than the value of investment in new plant and machinery and up to half the value of further investments in technology that forms parts of buildings, for example air conditioning.
As a result Amazon enjoyed a £75m discount on its tax bill for the year to December 2021, according to the foundation, resulting in Amazon having no tax to pay in 2021. It has already set aside almost £66m against its tax bill for next year based on an estimated £250m of trading losses from 2021.
If the company spends a similar amount on equipment for its warehouses this year, that number will rise again, so that Amazon would have to make profits of more than £600m in the UK before it paid corporation tax this year or next.
Amazon said it had invested more on its warehouses and logistics systems last year as it had expanded its operation. The company invested more than £2.3bn in infrastructure last year as it opened five new warehouses in Swindon, Dartford, Gateshead, Hinckley and Doncaster, three of which were kitted out with its latest robotics technology. It also continued to build and operate datacentres in the UK.
Paul Monaghan, the chief executive of the Fair Tax Foundation said: “Even before the super-deductions, Amazon paid little corporation tax in the UK, in part because the bulk of their UK income is still booked in Luxembourg.
“However, we now have a situation where Amazon UK Services are not only not paying tax, but they are being handed huge tax credits for investment that almost certainly would have happened anyway. This will ensure that tax payments are not only wiped out last year, but this year and future years as well.”
He added that the super-deduction was designed to encourage investment ahead of a pending increase in corporation tax. Should Liz Truss become the next prime minister she has pledged to ditch that tax rise, which would mean Amazon would have benefited from the super-deduction tax break without facing a higher basic tax bill.
Monaghan said the super-deduction would “in effect become an enormous £27bn sly handout to big businesses that are generating profits – and that’s on top of the £19bn per annum of [tax] revenues forgone due to cancellation of the rise itself”.
“I think many big businesses will be really uncomfortable as to how this playing out. The majority of profitable enterprises in the UK are happy to make a fair and meaningful tax contribution, and detest the dogma of the UK leading a race to the bottom.”
The US firm, which added 25,000 UK staff in 2021 to take the number of employees to 70,000 people, has come under fire for offering workers a below inflation pay rise this year of between 35p and 50p an hour to £10.50 or £11.45 an hour depending on location.
Hundreds of workers in warehouses across the country, including Tilbury in Essex, Dartford in Kent, Belvedere in south-east London, Coventry, Avonmouth near Bristol and Rugeley in Staffordshire, walked out after the 3% pay offer earlier this month.
It is understood that walkouts from shifts, sit-ins at canteens and “go-slow” protests continued at a smaller scale last week as workers continued to hope for a better offer from Amazon.
An Amazon spokesperson said: “The government uses the taxation system to actively encourage companies to make investments in infrastructure and job creation. These capital allowances are available to all eligible UK companies.
“Last year, we invested more than £11.4bn in the UK, building four new fulfilment centres and creating more than 25,000 jobs. Our total tax contribution increased to £2.77bn – £648m in direct taxes and £2.13bn in indirect taxes – as we have continued to grow and invest right across the UK.”
The company has also defended its pay rise, saying minimum salaries have increased by 29% since 2018 and it offers a comprehensive benefits package worth thousands of pounds annually.