Amazon UK Services sales soar but corporation tax payments halve

Turnover at Amazon's UK Services arm soared past £1bn for the first time in 2016, accounts filed on Companies House have revealed. However, its corporation tax payments halved to £7.4m after investment in its warehouses and distribution sent operating profit tumbling by over 50%.

The company racked up overall sales in the UK of $9.5bn (£7.3bn), up 5.6% year-on-year for the year to 31st December 2016, according to accounts filed in the US.

However, turnover of its Amazon UK Services arm, which relates to the company’s fulfilment operation and distribution centres in Britain, soared 55% within the year to $1.5bn.

At the same time, the company’s operating profit plummeted from £38.7m after tax to £25.6m as the company further invested in opening new warehouses and its fulfilment network. Meanwhile the level of corporation tax the company paid halved from £15.8m in 2015 to £7.4m in 2016.

The company is still receiving grants from the government which it uses to open warehouses, but these were lower, at £1.1m, down from nearly £2m a year earlier.

In 2016, Amazon opened two new distribution centres in the UK, in Manchester and Coalville. It also entered the grocery delivery market with the launch of AmazonFresh, as well as expanding fast delivery for Prime members.

Amazon changed its financial reporting practices in May 2015 after the government brought in the diverted profits tax (the so-called Google tax), which levies a 25% tax on profits for companies which “artificially” move their profits outside of the UK. The e-commerce giant has since claimed to pay tax on its UK retail sales as well as its services arm. However, the HMRC says it cannot not confirm this or reveal the level of tax paid by Amazon in the UK due to UK law.

An Amazon spokesperson said: “We pay all taxes required in the UK and every country where we operate. Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly-competitive, low margin business and our continued heavy investment." 

The company added that it had invested over £6.4 billion in the UK since 2010 including opening a new head office in London and development centres in Cambridge and London this year, and creating 5,000 permanent jobs across the country in research and development, our head office, customer service and fulfilment centres, to bring its total workforce to 24,000.

Amazon also opened a 15-storey head office London’s Shoreditch last month.