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Starbucks brings in £398m but pays no corporation tax in the UK

16 October 2012 by
Starbucks brings in £398m but pays no corporation tax in the UK

US coffee chain Starbucks paid no corporation tax in the UK last year, despite achieving sales of £398m.

The company has paid just £8.6m in corporation tax in more than 14 years, according to a four-month investigation by news agency Reuters, and none in the past three years. Its total UK sales since 1998 were in excess of £3b, but Starbucks had paid less than 1% of it in corporation tax.

In comparison, Whitbread-owned Costa, its closest UK rival, achieved a similar turnover with sales of £377m for the 12 months to 3 March 2011, but its tax bill came to £15m, or 30.5% of its profits.

In a statement, Starbucks insisted it had "paid and will continue to pay [its] fair share of taxes in compliance with all UK tax laws, as [it] always has".

But campaigner Richard Murphy from Tax Research UK, who was consulted by the Reuters team as part of its investigation, told the BBC: "Starbucks are playing the game here. This is tax avoidance; they're doing nothing illegal. That doesn't mean to say it's right, in my opinion."

Murphy said blamed the current rules on tax and called on politicians to put it right: "When we have a tax system that lets very large companies like Starbucks be on our high street and pay no tax and are competing with small locally owned businesses who are paying tax on all their profits, then there's something very clearly wrong with our tax system."

The UK annual results for the year ending 2 October 2011 show that Starbucks made a £32.9m loss, which is why it is not liable for tax. However, there is not enough detail within the report to explain why its UK operations have spent almost a decade in the red.

Starbucks' "cost of sales" was £319m, according to the latest filing at Companies House, which includes staff costs of £124m, an undisclosed amount of money paid in rent, and an £8.9m tax credit from 2010.

The company was left with a gross profit of £78.4m, against which £107.2m of "administrative expenses" was charged. The result was an operating loss of £28.8m and a loss before tax of £32.9m.

A spokesman for HMRC 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."

Tax expert John Whiting from the Chartered Institute of Taxation said HMRC monitored big companies carefully and the Government would be looking to close any genuine loopholes. But in terms of tax revenue, he told the BBC it was important to look at the bigger picture.

"In many ways corporation tax is a bit of a bonus - the company should be paying it if it is making profits," he said. "But in many ways the biggest contribution it makes is in creating employment - [which generates] PAYE, national insurance, paying business rates, VAT.

"The company may not be paying much corporation tax but the country will still be making a good profit out of them."

Starbucks said it was committed to the UK and pointed out that it planned to create 5,000 new jobs over the next five years.

By Janie Manzoori-Stamford

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