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Profit surge at Book Depository

The Amazon-owned Book Depository made a pre-tax profit of more than £15m in 2012 after selling intellectual property to another Amazon group ­ the same kind of inter-company arrangement that the online retailer has recently been heavily criticised for.

In the first financial results filed since the acquisition, The Book Depository recorded a £15.3m pre-tax profit for the year - a 400% rise from the £2.9m it made in the 18 months to December 2011, before Amazon bought it. However, sales at the company in the 12 months to 2012 totalled £125.5m, whereas in the 18 months to December 2011, sales totalled  £147.8m.

Amazon reported in the files that during 2012, The Book Depository¹s intellectual property was sold "to another Amazon Group company" and "licence agreements have been entered into so the company retains the right to utilise the intellectual property". This resulted in an extra £15.7m in "other income" for The Book Depository, according to accounts.

The arrangement whereby Amazon makes inter-company payments to form "a tax shield" has been heavily criticised in recent months, since Andrew Cecil, director of public policy at Amazon, appeared in front of the Public Accounts Committee in the House of Commons in November last year, asked to explain Amazon's low tax payments in the UK despite its high sales.

According to a Reuters investigation, Amazon, like other multinationals such as Google and Starbucks, locate their European headquarters in Luxembourg and reduce the tax they pay to governments by parking intellectual property in tax havens and charging affiliates big fees for using it.

The Book Depository paid £3.8m in corporation tax to the UK government in 2012, according to the accounts, up from just under £1m it paid in the 18 months to December 2011. Its offices are registered on Companies House as Thames Central Hatfield Road in Slough, although in its financial results, the company states "The immediate parent company is Amazon EU Sarl which is incorporated in Luxembourg."

Amazon bought The Book Depository in 2011. The merger was passed by the Office of Fair Trading despite opposition from several trade bodies including the Publishers Association, Booksellers Association, and Society of Authors and Independent Publishers Guild, on the grounds that it would give Amazon a monopoly in online bookselling.