Starbucks doesn’t pay a bean in UK tax

Coffee chain avoids big bills by declaring loss after loss

STARBUCKS has paid just £8.6million in tax in 14 years of trading in Britain, it emerged last night – and nothing at all in the past three years.

The tiny payments to the Treasury come from a coffee chain whose 735 UK outlets have so far run up sales of £3billion.

It uses a range of complicated measures to minimise its profits – and its tax bill. These include paying large royalties to another arm of the firm for using the brand name.

Over the past three years the company, which prides itself on its ethical standards, paid no UK tax at all despite racking up sales of £1.2billion.

During 2011, the most recent year for which figures are available, the group posted a UK loss of £33million on sales of £398million. Because of this it paid no corporation tax.

By comparison, McDonald’s racked up a 2011 tax bill of £80million on £3.6billion of sales and KFC paid £36million on sales of £1.1billion.

Starbucks is the second largest restaurant or café chain in the world after McDonald’s but now claims to have made no profit in the UK over the past ten years.

Despite the figures, executives have told investors that the UK business is profitable.

In 2011, it paid £26million in royalties and licence fees to let the UK coffee houses serve Starbucks products and use its labelling.

It does this by registering the intellectual property rights to another division of the company, which charges hefty royalties of 6 per cent on each cup of coffee.

In another complicated manoeuvre, Starbucks buys its coffee beans for all its European divisions through a firm based in Lausanne in Switzerland. Before the beans reach the UK they are shipped to Amsterdam to be roasted.

Experts who have studied the figures say the supply chain is a way of pushing profits around the world.

The third way in which Starbucks is thought to shrink its UK tax take is by funding its British division entirely by loans. These are taken out from another part of the group, although the company’s labyrinthine structure means that it is not known where. The interest on these loans will be charged to the UK arm at an unusually high rate, according to experts.

All of the practices deployed by Starbucks are legal.

The company’s US reports show that it incurred a tax rate of 31 per cent on its profits there last year.

‘So hideously

complex’

But for its overseas operations, which include the UK, the company’s average tax rate was only 13 per cent.

Michael Meacher, a Labour MP who campaigns against tax avoidance, said Starbucks was acting profoundly against the interests of the countries in which it operated. ‘They are trying to play the tax man, game him. It is disgraceful,’ he added.

John O’Connell of the TaxPayers’ Alliance said: ‘The tax system is now so hideously complex that large companies can afford expensive accountants to find loopholes and lower their tax bills. That can mean higher taxes for hard-pressed families.’

Tax accountant Richard Murphy said: ‘How can a set of rules that are so biased against small businesses be justified?

‘ The local competitors aren’t playing against Starbucks on a level playing field.’

A spokesman for Starbucks, which has to pay VAT on in- store hot drinks, said: ‘We have paid and will continue to pay our fair share of taxes in full compliance with all UK tax laws, as we always have. There has been no suggestion by any authority that we are anything but compliant and good tax payers.’

Last week it was revealed that Facebook, another American giant which has major UK operations, paid only £238,000 in tax despite raking in £175million in revenues.

The Mail has reported how Google avoided more than £200million in tax, only contributing £6million to HMRC during 2011 despite making revenues of £2.6billion.