Pay taxes according to the law!

It was announced last Tuesday that HMRC have collected an additional £23.9billion over the last year as a result of their investigations.

This has been achieved by a number of methods and it is clear that HMRC are making serious efforts to tackle what they see as tax avoidance.

Whilst on the Radio 4 Today programme, again last Tuesday, David Gauke, Exchequer Secretary to the Treasury, was asked about the UK tax paid by companies such as Google and Amazon, and included in his response was “I don’t want to be drawn into individual cases but I do think that you can’t expect HMRC to collect tax that isn’t in accordance with the law.  The answer is to make sure we have international reform…”

It seems that whilst the UK Government doesn’t like the amount of tax that companies such as Google and Amazon pay, it at least acknowledges that it is the law which is the deciding factor.

It has recently been reported that Amazon paid corporation tax of £4m on UK sales of £4.3billion, however, importantly, a company pays corporation tax on its taxable profit not on its turnover.

This led me to look at the latest accounts of Amazon.co.uk Limited which shows the turnover of this UK company was £449m and its principal activity is to provide fulfilment and corporate support services to other companies in the Amazon group.  The accounts also show that the profit before tax was £17m and the corporation tax charge for the year was £9.7m.  I understand that the reported UK sales made by Amazon are, in fact, made by its Luxembourg business.

As a multinational group Amazon is able to structure its affairs in a perfectly legal way and appears to pay the correct amount of corporation tax due in the UK.  Whether you think this is right or not depends on your point of view but I have to agree that tax should be paid in accordance with legislation.  If we don’t like the result of applying legislation then clearly it is up to Government to change the rules.

As always, we’re here to help you understand UK tax legislation and how it’s applied to your circumstances.

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