Starbucks’s UK retail arm received a £13.7m corporation tax credit last year despite increasing its sales by 6% and opening 92 new stores – after paying £41.3m in royalty and licence fees to its parent company produced a loss that almost exactly matched the fees paid, in a pattern that the Fair Tax Foundation has described as “Groundhog Day.”
The tax credit, which can be used to offset future corporation tax bills, comes after the UK retail business paid no corporation tax in 2024 either, having also fallen to a loss that year after paying £40m in royalty fees. The accounts, filed at Companies House for the 12 months to the end of September 2025, show Starbucks UK’s losses widened to £41.3m even as the business grew.
The numbers – and the pattern
The core mechanics of the arrangement are straightforward. Starbucks UK sold more coffee, opened more stores, and generated higher revenues – £556.3m in total, up 6% on the previous year. It then paid £40m in royalty and licence fees to Starbucks Emea, an entity that collects such fees from across Europe, the Middle East and Africa. That payment transformed what would have been a profitable operation into a loss-making one, with the loss almost exactly matching the royalty fee paid.
The result: no corporation tax paid by the UK retail business, and a £13.7m tax credit available to offset any future liability.
Paul Monaghan, chief executive of the Fair Tax Foundation, delivered a verdict that was withering in its precision: “This all feels so very Groundhog Day. As per a decade ago, Starbucks UK reports annual growth in income and store numbers, whilst at the same time declaring a loss due to the payment of hefty royalty fees to other Starbucks subsidiaries. The end result: no corporation tax is paid.”
The reference to “a decade ago” is pointed. Starbucks faced a major public controversy in 2012-13 when it emerged that despite generating hundreds of millions of pounds in UK sales over more than a decade, it had paid just £8.6m in corporation tax in the UK in 14 years of trading. The outrage at the time was significant enough that the company made a voluntary payment of £20m to HMRC, and the affair helped catalyse a broader national debate about multinational tax avoidance. More than a decade later, the underlying structure appears unchanged.
How the Emea arrangement works
The royalty fees were paid to Starbucks Emea, a UK-based entity that collects similar fees from Starbucks operations across Europe, the Middle East and Africa. That business itself made a profit of $84.5m on revenues of $402m – but paid out almost $65m under a “cost-sharing agreement” with the US parent and $17m in “support fees” to Starbucks Italy before calculating its taxable profit.
It paid $27m in corporation tax, the accounts show, though it was unclear how much of this would ultimately be paid in the UK given that the revenues were collected from operations across multiple countries. The company also paid a $207m dividend to the US parent, up $7m on the previous year.
A spokesperson for Starbucks said the group was “committed to paying all its taxes, wherever they are due” and described its approach as managing “global tax responsibilities in keeping with our mission and values.”
The business context
Starbucks says the loss widening in 2025 reflects genuine business pressures, not just fee structures. The company cited a “challenging consumer environment characterised by inflationary pressures, reduced discretionary spending and increased competition.”
The accounts show that unroasted coffee prices increased by more than 35% since August 2025, while wages and benefits costs rose 7.8% compared with 2024 – including the impact of the government’s increase in employer national insurance contributions. One-off costs associated with the closure of underperforming stores also contributed to the loss figure.
Despite those pressures, the business grew. Starbucks UK opened 92 more stores during the year, taking the total number of outlets – including those run by franchise partners – to 1,304. Company-run stores increased by 25 to 398. Sales rose 6% to £556.3m, with price increases, a new loyalty scheme and the introduction of “freshly baked in-store food” cited as contributors.
Overall staff numbers fell by 244 to 5,352, however, because the company shifted away from part-time workers towards full-time staff.
The parent company support
The accounts also reveal that Starbucks’s US parent has had to inject significant cash into the UK business to keep it liquid. The parent ploughed £30m into the UK retail arm in the year to the end of September 2025, and a further £60m in February 2026. That contribution was made to “strengthen the company’s liquidity position in the light of financial pressures experienced in 2024 and 2025” as well as costs linked to the company’s ongoing restructure.
The UK business also took out a £70m credit facility, which expires in December, and at its year-end in September had £166m of debts payable within a year – up from £144m the previous year.
The combination of rising debts, the need for parent company cash injections, and continued operating losses paints a picture of a UK business under genuine financial strain. But critics argue that the structural mechanism – paying royalty fees that convert profit into loss – means the true economic performance of the UK operation is obscured, and the tax liability that would otherwise arise from serving millions of British customers every week is avoided.
The broader debate
The Starbucks case is one of the most high-profile and long-running examples of a broader issue in UK tax policy: the ability of multinational companies to shift profits between jurisdictions through intra-group royalty payments, cost-sharing arrangements and management fees, reducing their taxable income in high-tax jurisdictions like the UK.
The OECD’s BEPS (Base Erosion and Profit Shifting) framework, introduced in the wake of the original Starbucks controversy and similar cases involving Amazon and Google, was designed to address exactly this kind of arrangement. More than a decade on, the Fair Tax Foundation’s assessment is that the fundamental pattern has not changed.
At a time when the UK government is raising employer national insurance to fund public services, and when small and medium-sized British businesses pay corporation tax on their profits without the ability to route fees through offshore entities, the persistence of the Starbucks structure is likely to attract renewed attention.
As Monaghan put it: “Groundhog Day.” The coffee is still being sold. The stores are still multiplying. And the corporation tax bill remains, year after year, conspicuously absent.
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