CA Practice: "StarBucks Pays Extra 20M Pounds Over Tax Assessment!"

Several weeks ago it emerged that the coffee chain had only paid £8.5m in corporation tax since it launched in Britain in 1998, despite enjoying sales of £3bn over approx. 15 years.

Up until now, Starbucks has insisted that its UK business does not make a profit because of the high rents it pays for its shops, and therefore has paid

little corporation tax.

The coffee chain also uses a number of perfectly legal mechanisms to further reduce the tax it pays, including handing a 4.7pc licensing fee to a separate arm of Starbucks in the Netherlands for image rights. It also buys its coffee from a Swiss division of Starbucks which charges a 20pc premium on the product.

Last week, Starbucks said it would overpay its tax bill in the UK by £20m over the next two years after coming under scrutiny over its tax arrangements.

Was the UK tax department Happy?

Hell No! Why should it be?

"Paying tax is an "obligation" of companies and individuals and is not like "the church plate going around on a Sunday morning", the Treasury chief secretary has said.

Kris Engskov, managing director of Starbucks UK, said that the company had been shocked by the "emotional" reaction of its customers to the tax row. Mr Engskov said that Starbucks will no longer claim tax deductions for royalties to its Amsterdam office, inter-company loans, capital allowances and coffee ¬purchases.

However, despite the unprecedented payment, Starbucks was targeted by protesters over the weekend who called for the company to overhaul its accounting measures and tax arrangements.