Coffee giant Starbucks fails to pay British taxman in past three years

By JAMIE GRIERSON
Published on 16/10/2012 13:19

COFFEE giant Starbucks has reportedly paid just £8.6 million in corporation tax in 14 years of trading in Britain – and nothing in the past three years.

• Starbucks found to be paying royalties to other parts of business to avoid tax

• UK operation of coffee firm effectively recording loss

• Starbucks says it paid its “fair share of taxes” and has complied fully with UK law

• Scheme not illegal under UK law

The American coffee firm – valued at £25 billion – has generated more than £3bn of sales in the UK since 1998 but has paid less than 1 per cent in corporation tax.

Its nearest UK rival, Costa, owned by Whitbread, recorded £377m sales last year, compared to Starbucks’ £398m, but its tax bill came to £15m, or 31 per cent of its profits.

Starbucks, which has more than 700 outlets in the UK, said it has paid its “fair share of taxes” in full compliance with UK law and no authority had suggested otherwise.

The Seattle, Washington state-based firm is the latest to come under scrutiny for its contribution to HM Revenue & Customs (HMRC) after Facebook and Google met similar criticism.

A four-month investigation discovered that Starbucks was able to cut income tax by paying fees to other parts of its global business, such as royalty payments for use of the brand.

This means Starbucks UK is effectively making a loss and, therefore, does not have to pay any corporation tax. As a result, it has not broken any law.

However, Labour MP and tax campaigner Michael Meacher said Starbucks’ practice is “profoundly against the interests of the countries where they operate and is extremely unfair … they are trying to play the taxman, game him. It is disgraceful”.

The most recent results, posted for 2011, show Starbucks UK recorded a loss of £33m. However, it is understood that Starbucks has told investors the business is profitable.

The largest restaurant or cafe chain in the world after McDonald’s, Starbucks paid £26m in royalties and licence fees to let the UK coffee houses use its labelling.

It does this by registering the intellectual property rights to another division of the company.

An HMRC spokesman said: “For legal reasons, we cannot comment on the tax affairs of individual businesses, but we make sure that multinationals pay the right tax to the UK in accordance with UK tax law.

“Our tax rules combat tax avoidance and we employ specialist tax professionals to ensure that multinationals play by the rules.”

Last week it was revealed that Facebook paid only £238,000 in tax in the UK, despite pulling in £175m in revenues, while Google reportedly paid £6m in UK tax despite revenues of £2.6bn.