Amazon could avoid UK tax for two more years due to ex-Chancellor's tax break

Amazon could avoid tax in the UK for at least two more years after benefiting from reliefs brought in by Rishi Sunak during the pandemic, according to The Guardian.

Research from the Fair Tax Foundation shows that the company claimed over £800 million in capital allowances in 2021, £500 million more than in 2020.

The value of these allowances was heightened by the super-deduction scheme for businesses that invest in infrastructure, which was introduced by Sunak last year when he was Chancellor.

Under the scheme, which runs from 1 April 2021 until 31 March 2023, companies are able to claim a 130% super-deduction capital allowance on qualifying plant and machinery investments and 50% first-year allowance for qualifying special rate assets.

The super-deduction allows companies to cut their tax bill by up to 25p for every £1 they invest.

As a result, the newspaper reported that Amazon received a £75 million discount on its tax bill for the year to December 2021, resulting in the company having no tax to pay in 2021. Amazon has already set aside almost £66 million against its tax bill for 2023 based on an estimated £250 million of trading losses from 2021.

If Amazon spends a similar amount on equipment for its warehouses in 2022, that number will rise again, so that the company would have to make profits of more than £600 million in the UK before it paid corporation tax.

CEO of the Fair Tax Foundation, Paul Monaghan 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.”

An Amazon spokesperson told The Guardian: “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 £11.4 billion in the UK, building four new fulfilment centres and creating more than 25,000 jobs. Our total tax contribution increased to £2.77 billion – £648 million in direct taxes and £2.13 billion in indirect taxes – as we have continued to grow and invest right across the UK.”