Starbucks reveals major rise in corporation tax bill

The firm has responded to negative feedback from tax-paying customers
The firm has responded to negative feedback from tax-paying customers

Coffee chain Starbucks said it paid £8 million in corporation tax last year after posting record UK profits.

The UK arm of the US-based chain said pre-tax profits jumped to £34.2m in the year to September 27, compared with less than £2m a year ago - as it closed unprofitable shops and reshaped its store portfolio.

The group, which runs 843 UK stores, added that like-for-like sales grew at 3.8% in the period.

The business said in 2012 it would pay more tax after a public outcry over its tax affairs, which led MPs to call its corporate structures “immoral”. It was claimed Starbucks transferred profits to lower tax jurisdictions.

Prior to that, the firm paid £8.6m in corporation tax in its 14 years of trading in the UK, despite racking up sales worth billions of pounds since it was launched in 1998.

The business actually paid £11.4m in corporation tax last year, but this was part of a voluntary £20m two-year pledge to pay more tax in response to increasing public pressure.

Starbucks European, Middle East and Africa president Kris Engskov said: “Before and after tax profits are both up by more than £30m, as we have invested in the store experience while managing our costs.

“As a result our corporation tax payments also increased.”

A growing number of US and other international firms are being investigated over their tax affairs by the European Commission (EC).

In October, Starbucks and Italian carmaker Fiat were ordered to repay up to h30m (£22m) in illegal tax breaks after the EC found that deals struck between the coffee chain in the Netherlands and carmaker in Luxembourg effectively amounted to illegal state subsidies that must be repaid.