Caffè Nero has not paid a penny in UK corporation tax for a decade despite selling around £2billion of lattes and flat whites.
The company that controls the chain’s 637 shops in the UK and Ireland, Italian Coffee Holdings, has just reported sales of £288million for the 12 months to May 31, 2017 – but paid zero corporation tax for the year.
Italian Coffee Holdings, which has its headquarters in London’s Covent Garden, made a profit of just under £26million. But it paid no UK corporation tax because its parent company made a £25.5million loss. The red ink was caused by interest payments on its large borrowings from banks.
Caffè Nero has not paid a penny in UK corporation tax for a decade
Corporation tax is charged at a rate of 19 per cent on a company’s profits, but if firms make a loss they do not have to pay anything.
Caffè Nero, founded by Californian private equity mogul Gerry Ford in 1997, has paid zero corporation tax to the British Exchequer since 2007.
In that year, Mr Ford, who had previously listed the company on the London Stock Exchange, turned it back into a private company. In order to do so, he borrowed large sums from banks. At the latest count, the Caffè Nero group’s net debt is around £300million.
The annual interest payments on those loans has been larger than the profits ever since, leaving Italian Coffee Holdings’s parent company, Caffè Nero Group Holdings, running at a loss.
Directors said that meant ‘no entity within [the group] was due to pay tax for the year’.
The heat is on: Caffè Nero boss Gerry Ford is likely to get a roasting from consumers over tax
The coffee chain’s ultimate parent company is incorporated in the tax haven of Luxembourg. Mr Ford holds controlling stakes through two firms based in the Isle of Man.
The rival chain Starbucks made a £200million voluntary contribution to HMRC when consumers threatened a boycott of the brand.
There is no suggestion Caffè Nero has broken any tax rules and it has created nearly 1,000 jobs in the past three years.
But Paul Monaghan, chief executive of the Fair Tax Mark ethical accreditation scheme, said its tax arrangements are ‘parasitic’ and ‘insulting to the intelligence of the British people’.
He added: ‘Time and time again, the likes of Caffè Nero come up with reasons to avoid paying their share of corporation tax.’
A spokesman for Caffè Nero said the company ‘has always, and will continue to pay, all applicable taxes due in the UK’. It paid more than £61million of other taxes such as VAT and payroll levies to the UK Government in 2016-17.