Starbucks received a tax credit worth Â£ 4.4million in the UK due to losses in 2020, although the coffee chain’s US parent company made a profit of 1.2 billion dollars (870 million pounds sterling) over the same period.
The loss comes after a year in which Starbucks was forced by the pandemic to temporarily close all of its 935 stores in the UK, causing revenue to drop sharply.
However, the revelation that an American global company is demanding tax credits from the British government will give new impetus to a planned international deal on reforms designed to prevent profit shifting by multinationals.
Starbucks uses a complex corporate structure in Europe, and it has come under heavy criticism for its lack of transparency from tax activists. Its UK branch recorded cumulative after-tax losses of more than Â£ 100million between 2010 and 2020, according to Guardian’s analysis of its accounts. In just four out of eleven years he has reported a profit, but tax experts say it’s unclear whether they accurately reflect the business.
The UK branch of Starbucks said it lost Â£ 41million in the year through September 2020, according to accounts filed with Companies House. UK accounts show “gross profit” of Â£ 32million for the year, but then show unspecified “administrative expenses” of Â£ 70million.
The loss resulted in a “negative tax burden” of Â£ 4.4million, Starbucks said, meaning it can claim taxes previously paid on profits. The UK branch of Starbucks paid Â£ 1.9million in UK corporate tax in the 2019 tax year and Â£ 4million in 2018.
The company said the losses were due to foreclosure restrictions. Starbucks was forced to suspend operations, although it did not put any of its 4,300 employees on leave or choose to use government support. UK income for the year fell to Â£ 243million, down almost a third from the previous year.
Nation states are working on a way to tax multinational corporations more effectively. Leaders of the G7 group of rich economies, including the UK and US, agreed earlier this month on a framework for a deal that would mean companies would pay a percentage of their profits in the markets where they are making significant sales, as well as setting an unprecedented global minimum. Corporation tax.
Starbucks Corporation, the US parent company, made pre-tax profits of $ 1.16 billion (Â£ 830 million) in the year ending September 27, 2020, on revenue of 23. $ 5 billion.
Starbucks’ European business paid a dividend worth $ 183 million to the US parent company. Dividends between companies of the same group are not taxable.
UK coffee shops are run by Starbucks Coffee Company (UK) Limited, but they pay royalties to Starbucks EMEA Limited, another UK registered company, which collects profits from subsidiaries across Europe, the Middle East and Africa.
A Starbucks spokesperson said: âStarbucks Coffee Company (UK) Ltd paid no dividends, as the accounts clearly show. Royalties are paid by all subsidiaries in the EMEA region to EMEA Ltd for the use of the mark. EMEA Ltd also did not pay dividends.