02/12/2012 09:25 GMT | Updated 02/12/2012 09:38 GMT

Starbucks To Review 'Tax Approach' With HMRC After Customer Boycott

Starbucks has said it is in talks with HM Revenue and Customs over its financial practices after coming under fire for paying no corporation tax in the UK in the last three years.

The US coffee firm - valued at £25 billion - has generated more than £3 billion of sales in the UK since 1998 but it emerged in October it has paid less than 1% in corporation tax.

Starbucks, which has more than 700 outlets in the UK, said it was "committed to the UK for the long term" and added: "We are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with the Treasury."


Starbucks has said it is in discussion with HMRC

The company said it would release further details of its UK tax plans this week, but according to the Sunday Times is preparing to pay more into Britain's coffers following a customer boycott.

Their comments came as George Osborne announced extra investment to crack down on tax avoidance by global companies with British operations.

The Chancellor plans to bolster the Inland Revenue team that deals with multinationals amid widespread condemnation of big-name firms like Starbucks, Google and Amazon after it emerged they pay little or no corporation tax in the UK.

Osborne told BBC 1's Andrew Marr Show: "I think you can do two things. One is you can enforce the taxes we have got and I am going to be announcing tomorrow extra investment in the part of the Inland Revenue that tackles tax avoidance by multinational companies.

"Second, you make sure internationally we have the right rules and it is actually Britain who has been working with Germany and France to get those rules on the international table.

"So we are doing those things but let me just say we can't tackle this by pricing Britain out of the world economy. If we make our taxes less competitive that will just mean more companies stay out of Britain."

UK Uncut issued the following statement after Sunday's news, calling Starbucks' announcement a "blatant admission of guilt that they have intentionally avoided tax in the UK for years.

"It is not up to Starbucks to promise it will pay a bit more tax when it suits them, it’s up to the government to force companies to pay their fair share," a spokesperson for the group added.

"This announcement shows that protest and public pressure works and that we are doing the government’s job for them as they refuse to tackle tax avoidance.

"The government’s next step must be to close the loopholes that Starbucks and other companies use to avoid paying billions in tax to the UK, instead of targeting single mums and disabled people through slashing public services, the welfare state and privatising the NHS."

Starbucks reportedly paid just £8.6 million in corporation tax in the UK in the last 14 years. The revelations prompted widespread anger amongst customers, with many threatening to buy their hot drinks elsewhere.

Its nearest UK rival, Costa, owned by Whitbread, recorded £377 million sales last year, compared to Starbucks' £398 million, but its tax bill came to £15 million, or 31% of its profits.

Starbucks previously said it paid its "fair share of taxes" in full compliance with UK law and no authority had suggested otherwise.

A four-month investigation by news agency Reuters discovered that Starbucks was able to cut income tax by paying fees to other parts of its global business, such as royalty payments for use of the brand.

This means Starbucks UK is effectively making a loss and therefore does not have to pay any corporation tax. As a result, it has not broken any law.

The most recent results, posted for 2011, show Starbucks UK recorded a loss of £33 million.

A Starbucks spokesperson said: "Starbucks is committed to the UK for the long term and we have invested more than £200 million in our UK business over the past 12 years.

"Starbucks has complied with all the tax laws in this country but has regretfully not been as profitable as we would have liked.

"We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more.

"As part of this we are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with the Treasury. We will release more details later in the week."