In a bid to end the pressure on the coffee chain, the US giant dramatically broke off talks with HM Revenue & Customs (HMRC) to offer to “pay or pre-pay somewhere in the range of £10m in each of the next two years”. Starbucks has paid just £8.5m corporation tax in 14 years, despite UK sales of £3bn – a tax rate of less than 1pc.
Kris Engskov, managing director of Starbucks UK, admitted that the payment plan was an “unprecedented commitment” and that he had not yet “shared” the idea with HMRC. While keeping its tax arrangements unchanged, Starbucks said it would “not claim deductions” it has been taking for royalties to its Amsterdam office, inter-company loans, capital allowances and coffee purchases.
Starbucks was “taking action to pay corporation tax by not taking those deductions any longer”, he said, adding that the company had been shocked by the “emotional” reaction of its customers to the tax row.
On Thursday night, however, tax experts described the company’s payment proposals as “commercially gobsmacking”, while politicians warned that the move underscored the view that the UK’s tax system is being treated as a “complete joke”. Even tax campaigners at UK Uncut dismissed the move as “just a desperate attempt to deflect public pressure”.