Coffee giant Starbucks has paid its first corporation tax in the UK since 2008, with a £5m payment to HMRC as the first tranche of a promised £20m contribution by the end of 2014.
Starbucks says it will be paying £5m more later this year, plus an additional £10m during the course of next year. The move follows an outcry after it was discovered that Starbucks had paid only £8.5m in corporation tax since its launch in the UK in 1998, despite sales of £3bn.
In response, Starbucks said in December 2012 that it would 'not claim deductions' it has been taking for royalties to its Amsterdam office, inter-company loans, capital allowances and coffee purchases and offered to 'pay or pre-pay somewhere in the range of £10m in each of the next two years'.
In a statement, Starbucks said: 'Six months ago, we felt that our customers should not have to wait for us to become profitable before we started paying UK corporation tax,' it said in a statement. 'We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay £10m in corporation tax this year and a further £10m in 2014. We have now paid £5m and will pay the remaining £5m later this year.'
Starbucks originally claimed that its low payments of corporation tax were down to difficulties in making its business profitable in the UK, rather than tax avoidance strategies. It now says it is working on measures to address this, such as moving weaker stores to more 'cost-effective' locations and closing them where that is not possible. It also said it would rely more on franchised and licensed stores.
In evidence to the Public Accounts Committee (PAC) the company said that it had made a loss for 14 of the 15 years it has been operating in the UK apart from 2006, when it made a small profit. It said its 'over-aggressive' entry into the British market had left it with expensive properties that did not make money.