As you stop for a quick caffeine and sugar hit while you’re Christmas shopping, this latest story may affect your choice of coffee shop. Caffe Nero are the latest in a line of huge companies that are not paying the amount of UK tax we would expect. They have had £1bn of sales, with £334m in revenue, in the UK since 2007 but haven’t paid any corporation tax in that entire time.

Why isn’t Caffe Nero paying corporation tax?

HMRC’s corporation tax rules state that companies do not have to pay this tax if you have not made any profit. Caffe Nero is a British company and did make a profit of £22.5m in the financial year to June 2018. But they have enormous interest payments of £39m on debts accrued during privatisation in 2006. These wipe the profit figure off the books and leave Caffe Nero without having to pay UK corporation tax. In fact, the company is actually in the red overall, despite £334m revenue. These figures are available through the accounts declaration of the company that owns Caffe Nero, Caffe Nero Group Holdings.

Are they doing anything illegal?

No, as they are operating under HMRC’s own corporation tax rules, there is no suggestion that Caffe Nero are breaking any tax laws. In fact, they have paid a total of £68m in business rates on their 666 cafes, VAT and employment taxes over the last decade.

It just appears unfair that they take such large sums in sales without having to pay the corporation tax that other firms are subject to. For example, based on last year’s figures, Caffe Nero made a £24m loss. Had they been in profit, their corporation tax bill would have been £5.1m.

The company’s statement on the issue says: “Caffe Nero has always paid and will continue to pay all applicable taxes in the UK. In the last three years, we have created over 1,000 new jobs.”

How can we improve this situation so that everyone is paying a fair share?

There is a Parliamentary group on responsible tax and, as reported by the Mirror, its chairperson Dame Margaret Hodge said: “I’m completely fed-up of big companies creating financial wheezes to avoid paying their fair share of tax. The British public… will be absolutely furious. The Government need to turn words into action.”

But it’s not just that companies are taking advantage of UK tax laws. The Organisation for Economic Co-operation and Development (OECD) recently published results of its research showing the international impact of global companies’ manipulation of taxation laws. They estimate that £190bn every year is being lost to economies around the world in unpaid taxes.

Perhaps both a domestic and international strategy are needed to combat this costly global problem.