Caffe Nero pays no tax on £25.5m profit

Hasn't paid a penny since 2007

UK - London - Coffee drinkers in Caffe Nero window

Coffee shop chain Caffe Nero paid no corporation tax in the UK last year - despite making £25.5 million profit.

The company, which has more than 600 branches in the UK, might have been expected to face a bill of £5.1 million.

However, it's been able to avoid paying a penny by claiming that its parent company, Rome Pikco Group, reported a loss of £22.2 million for the year. According to Rome Pikco's annual accounts, the reason that 'no entity within the Group was due to pay tax for the year' is because of 'arm's length interest payments to banks'.

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In fact, Caffe Nero has used exactly the same mechanism to avoid paying corporation tax for the last ten years.

Last year, for example, it made profits of £23.6 million - even higher than this year. However, it didn't pay a penny in corporation tax on this whopping amount, again citing interest payments made by its parent company.

It last paid in 2007.

The news is just the latest example of how some of the world's largest companies are consistently avoiding corporation tax bills in the UK.

Internet firms Amazon, Google, Ebay and Facebook have all used similar accounting mechanisms to avoid bills that could otherwise have run into the billions.

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Meanwhile, rival coffee chain Starbucks cut its bills for years by claiming that it bought all its coffee beans via a Swiss-based sister company and Dutch subsidiary. The price it paid, it claimed, wiped out most of the profits in the UK.

However, in 2015, it agreed a one-off payment of £20 million to be paid to HMRC over two years. And, after changing its accounting practices, it paid £8.1 million in 2015 and £15 million last year.

So far, though, Caffe Nero has resisted pressure to do the same thing.

UK to slash corporation tax after Brexit blow

Corporation tax in the UK is currently 20%, although the government has pledged to cut that to 17% by 2020. And Theresa May has suggested that the rate should be slashed still further to try and stop large corporations quitting the country when the UK leaves the EU.

However, late last week, a JP Morgan economist advised clients that the UK would have to scrap corporation tax altogether to have anywhere near enough effect - meaning that Caffe Nero would, like all other big firms, be off the hook.

Ten terrible tax excuses

Ten terrible tax excuses