If the Government want Amazon to pay more tax it will have to change the rules


Amazon’s UK accounts for 2017 show profits of £72m and a tax charge of £1.7m – so yet again, people are asking whether big multinational companies and Amazon in particular, pay enough tax.

Heather Self, partner, said: “We don’t know the full details of Amazon’s tax computations, but some information can be gathered from what they have published.”

She added: “First, these are the accounts for Amazon UK Services Ltd – the fulfilment company, which provides delivery services for goods bought from Amazon. It’s a high turnover (almost £2bn this year), low margin business.  

“The actual sales of goods are reported through a Luxembourg company, Amazon EU Sarl – and that company does have a UK branch and probably pays some UK tax as well, although it’s not possible to work out the precise figures from the Luxembourg accounts.”

Heather said: “Amazon UK Services looks to have a fairly straightforward tax computation.  It has actually paid current tax of £4.6m, but there is then a deferred tax adjustment of £2.9m which brings the net tax charge down to £1.7m. Deferred tax just reflects the fact that some items are allowed for accounts purposes at a different time than for tax – it’s an accounting exercise and nothing more.”

She added: “The big adjustment in the computation relates to share-based payments.  Amazon gives its employees share options, so that the employee makes a profit if the value of the shares goes up. This is very common in tech companies, and allows employees to share in the success of the company – and the tax rules specifically give a deduction for these payments. There is nothing 'dodgy' about getting a tax deduction for the costs of giving your employees shares.”

Heather said: “The real issue for many high street retailers is that their costs are very different from Amazon’s – they have expensive premises, higher staff costs and pay much more in business rates. That simply reflects a very different business model and the way in which people increasingly choose to shop online.

She added: “If the Government wants Amazon to pay more tax it will have to change the rules – and it is fair to say that corporation tax rules were written before the age of global businesses, let alone massive online companies. But any change would have to be agreed internationally – and that’s not going to be easy. Progress is being made but major change is not likely in the near future.”

For more information, please contact Heather Self.