Starbucks pays back £15m to UK government

Starbucks, the US coffee house chain, has now paid £15m ($24.6m, €18m) of the £20m it offered to the UK tax authorities after revelations of tax avoidance by several large corporations.

The company, which posted a loss on its UK operation for three years and escaped tax, volunteered to pay £10m last year and £10m this year, even if effectively it did not make a profit.

Previously it declared a 20% premium paid to its Swiss division for purchasing coffee beans and a 4.7% premium to its Dutch division for roasting the beans.

It decided not to list these premiums and its inter-company loans as tax deductions so that it could present taxable business profits instead of losses.

Making the announcement last year, Kris Engskov, managing director of Starbucks UK, said: “These decisions are the right things for us to do. We’ve heard that loud and clear from our customers.”

At the time Chris Morgan, head of tax policy at KPMG, the UK-based international professional services consultancy, said: “It is the first time I have seen public opinion make a company change its mind.”

Conservative MP Steve Barclay observed: “This payment is more to do with corporate reputation than corporation tax.”

Starbucks had to reorganise its tax accounting to pay the £20m because businesses and individuals cannot voluntarily contribute money to government bodies.

Lady Bakewell, the television presenter and journalist, wanted to return her winter fuel allowance, a yearly payment made by the UK government to state pensioners. She recalls: “I was told no mechanism exists in the machinery of the state to take the money back.”