Amazon is in the headlines again today after its accounts revealed it is paying even less tax than last year.

The US company started as an online bookseller but quickly established its dominance across e-commerce before branching out into streaming, consumer electronics and cloud computing.

Amazon is on course to become one of the first companies to reach $1 trillion market capitalisation, and CEO Jeff Bezos was declared the richest man in modern history by Forbes last month.

Critics are wondering, then, how the company is managing to reduce its tax payments. FactCheck takes a look.

How much tax is Amazon paying in Britain?

Most of the headlines today are about a specific subsidiary of Mr Bezos’ empire: Amazon UK Services Limited. This is essentially the UK distribution side of the business, covering activities in more than a dozen giant warehouses across the country.

The company’s pre-tax profits increased from £24m in 2016 to £72m in 2017, but its tax bill fell from £7.4m to £4.6m.

And payment has been deferred for much of the bill, meaning the division will only have to hand over £1.7m to the taxman.

How has the company lowered its tax bill?

Amazon has been paying employees in the form of shares, which is an expense it can offset against corporation tax.

Current rules say employees can be awarded £3,600 a year tax-free. Amazon’s share price has more than trebled in the last three years, so few employees given shares are likely to be complaining.

The only loser is HMRC, which misses out on the corporation tax and the taxes it would have got if the money had been paid as part of a salary.

This is completely legal, and long-established government policy. The idea of giving companies tax breaks to encourage them to give shares to workers was first launched by the then-Labour government in 2000.

It’s worth noting that the workforce went up by more than 5,000 in 2017, which means more money from income tax, national insurance, VAT flowing to the Exchequer.

Is that the whole story?

Absolutely not. Amazon UK Services Limited is only one part of the company’s activities in this country.

Amazon revealed in US filings that its total sales to the UK rose from £9.5bn to more than £11bn in 2017.

But the tax paid on all these UK sales is not publicly available information.

Why? Because sales made to customers in the UK are booked through the UK branch of a Luxembourg-based company, Amazon EU Sarl.

Retail sales were previously booked directly through the parent company, in order to take advantage of lower tax breaks in Luxembourg.

In 2015, the UK government introduced a “diverted profits tax” to try to stop companies taking advantage of arrangements like these.

Just before the new tax came into force, Amazon opened the UK branch, meaning UK sales and profits were declared to HMRC.

But the fact that sales are booked through the UK branch of an overseas company, rather than through a UK-based subsidiary means Amazon doesn’t have to publish accounts detailing the tax it pays in respect of its total activities in the UK.

Again, this arrangement is entirely legal.

Amazon put out a statement today saying: “We pay all taxes required in the UK and every country where we operate.

“In May 2015, to ensure we had the best business structure to serve our customers going forward, we established a local country branch of Amazon EU Sarl in the UK, with all retail revenues, expenses, profits and taxes due now accounted for in the UK.”

Why are high street retailers angry?

Critics often point to the fact that Amazon pays less in business rates on its UK properties than some traditional retail rivals.

This is sometimes reported as though the company has carved out some kind of tax break for itself, but it’s really just the result of Amazon’s business model.

Business rates are calculated according to the market value of property businesses own.

So a shop that occupies a piece of prime Central London real estate will pay higher rates than a company like Amazon, which operates from out-of-town locations in areas with lower property prices.

Once again, it’s important to note that Amazon isn’t breaking any laws here, but traditional high street retailers will no doubt be concerned about their ability to compete.

A traditional shop with an expensive town centre will not be able to take advantage of complex international tax arrangements, and will not be able to shift its operations out of town without suffering.

Professor Paul Dobson, Professor of Business Strategy and Public Policy at the University of East Anglia, told FactCheck: “It’s perfectly legal, it’s just frustrating if you are a domestic player.

“Amazon are a brilliant company. The question is really about the fairness of the rulebook. The cards are really stacked against smaller domestic players.”