Caffè Nero tax affairs leave bitter tasteMay 2014
Caffè Nero has become the second coffee house chain to provoke the anger of UK politicians by avoiding corporation tax.
Since 2007 it has recorded pre-tax profits of almost £100m ($167m, €120m) on sales of nearly £1bn but has paid no corporation tax in that time.
Its 2012-13 returns show a £21.1m profit on £204.3m sales, but Gerry Ford, the chief executive and chairman, explains the gain was wiped out by interest payable on £250m debts.
Caffè Nero’s tax affairs are, however, complicated by its company structure. The accounts show that Caffè Nero’s owner, Rome Pikco, made pre-tax profits of £39.9m on £185.2m sales in 2012-13 but carried gross debts of £375.7m, including a £179.1m fixed-rate loan from its parent company. The parent is in the Isle of Man, where standard corporation tax is 0%.
Ford says: “We always pay our taxes.” He emphasises that Caffè Nero pays interest on its debt to UK banks, which are then taxed on their income. Additionally, the company pays National Insurance contributions, business rates and value-added tax.
Margaret Hodge, chair of the UK parliament’s public accounts committee, who last year called tax avoidance by the Starbucks cafe group, along with Google and Amazon, “immoral”, retorted: “It’s still far too easy for global companies to structure themselves so they do not pay their fair share of taxes.
“It’s about time the government matched up to their tough rhetoric and really clamped down on this.”
Labour MP John Mann, a member of the Treasury select committee, said: “It’s unfair competition. If other cafes around the country, including those owned by families, are paying proper British taxes, why shouldn’t this company?”
Vince Cable, the government’s Business Secretary, demanded that the Chancellor “get to grips” with tax avoidance in his autumn statement.
Caffè Nero was founded in London in 1990, has 480 UK coffee shops and derives almost all its income in Britain. Despite debts, its aim is to open 225 more UK bars during the next five years and to expand into the US.
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