Starbucks’ UK-based European firm made huge profits of £162million across the continent last year but paid just £4.5million in tax.

It means the business effectively paid a rate of 2.8 per cent tax in the UK, despite corporation tax being set at 19 per cent.

But separate entity Starbucks Coffee Company UK paid £3.3million in tax against profits of just £4.5million, a rate of 73 per cent.

It comes following a lengthy row over Starbucks’ tax habits, with the firm previously paying just £8.6million in corporation levies over a 14-year period to 2012.

Starbucks UK-based European operation paid just £4.5million in tax last year despite making huge profits of £162million

Starbucks UK-based European operation paid just £4.5million in tax last year despite making huge profits of £162million

The huge gap between profit and tax for the European company – which covers 3,000 stores in 40 countries – was partly created by gaining tax breaks by paying employees in shares and deductions on other expenses.

The firm’s profits were also boosted by a dividend of £114million from a subsidiary company that had already paid its taxes.

But even if this dividend was not included, Starbucks Europe would have paid just 9.3 per cent tax. 

Starbucks moved its European headquarters to London to try to allay fears over its practices while its UK operation decided not to seek tax breaks on fixed assets for 2017. 

However the company was able to pay out £46million in dividends to its parent company – which paid zero UK corporation tax, according to its most up to date figures. 

Accounts for Starbucks’ European business cover the year to October 1, 2017, and show profits actually fell slightly from £166 million to £162million. 

The firm was able to take advantage of some tax breaks, but its UK-only business actually paid a 73 per cent tax rate 

The firm was able to take advantage of some tax breaks, but its UK-only business actually paid a 73 per cent tax rate 

The firm was able to take advantage of some tax breaks, but its UK-only business actually paid a 73 per cent tax rate 

The latest accounts for Starbucks UK also cover the year to October 1, 2017, and have been published three months late. 

The report said its UK account ‘reflected reduced operating profits, offset by the profit on disposal of stores’. 

Starbucks also said its costs had risen in 2017 as part of increased investment.

The company report said: ‘Trading conditions for the consumer sector on the UK high street remain challenging and consumer confidence was lower than the prior year, resulting in lower footfall and subsequent sales across the store estate.’

Salaries for the 5,379 staff cost the business £82.2million and the highest paid director received £188,232.

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