Two national newspapers have confirmed that Caffe Nero paid no corporation tax whatsoever last year on profits of £39.9 million made on its country-wide coffee chain’s total sales of £185.2 million.
Now fighting a planning appeal to decide whether its Marlborough High Street outlet should be closed, the company has joined Starbucks, Amazon and other major businesses criticised for avoiding, albeit legally, tax demands.
Marlborough town councillor Richard Pitts described the situation as “shocking” and ought to cause public outrage with customers now boycotting the café, which opened in April without planning consent.
Caffe Nero’s American-born chairman and chief executive, Gerry Ford, who owns 60 per cent of the company, Rome Pik Holdco, has defended the business’s tax affairs.
Denying that the chain 480-strong coffee chain does not pay any tax, he told the Daily Telegraph: “We always pay our taxes. In the last few years our operational profits have been wiped out by paying UK banks interest.”
“They, in turn, pay taxes on our money that they get.”
The international company, which also has outlets in Turkey, the United Arab Emirates and Poland, is subject to payroll taxes paid on nearly 4,000 members of staff, as well as business rates on its UK premises.
The Sunday Times reports that Caffe Nero is the latest company to be caught side-stepping tax by using legal accounting manoeuvres by siphoning its profits to subsidiaries based in Luxembourg and on the Isle of Man, where the standard rate of “corporate income tax” is nought per cent.
“According to its accounts, its main British subsidiary, Rome Pik Holdco, owed £220 million to a sister company in Luxembourg in May last year. The repayments sent overseas can be legally used to reduce its corporation tax bill in Britain.”
Caffe Nero declined to comment when the newspaper made contact with the firm.
The possibility that Caffe Nero was among those companies who made themselves legally exempt from corporation tax was made by Councillor Pitts when he appeared on BBC radio Wiltshire last week.
He reported on the local opposition to Caffe Nero’s arrogant behaviour in ignoring planning rules when opening in a former fashion store Marlborough and only seeking change of use planning consent in retrospect.
This was refused by Wiltshire Council’s eastern area planning committee in July and the council’s enforcement notice for the café to be closed is now to be challenged at a public inquiry at Marlborough town hall on January 15.
Councillor Pitts told Marlborough News Online: “This can only add to the public outrage of major companies failing to pay their fair share of taxation in the UK and thus putting a greater burden on ordinary people to keep the country going.”
“We need a campaign now to expose Caffe Nero’s hypocrisy to local residents and make them realise that it is not the kind of company they should support if it is siphoning off its profits to the Isle of Man and Luxembourg in order to reduce its corporation tax commitments.”
“That will hopefully drastically reduce the number of people using Caffe Nero and that should totally undermine its false claim that it is adding to the vitality and viability of Marlborough.”
“That is the main plank of its appeal against Wiltshire’s refusal to grant the company retrospective planning consent when it so arrogantly opened its doors without bothering to telling any of the authorities involved.”
He pointed out that choice was a vital element in the whole question of shopping centres, but it was not a level playing field if they were dominated by three chains, Caffe Nero, Starbucks and Costa Coffee, to the detriment of independent cafes, pubs and restaurants.
It was important to note that Costa was the only one of the trio who did pay corporation tax and was not “outside of society” and, Councillor Pitts added:
“Currently this is a shocking situation that provides further evidence that we must resists Caffe Nero’s so called charms.”
Paul Shimell, president of Marlborough Chamber of Commerce, protested: “This is like throwing sand into local traders faces. First Caffe Nero ignore the planning rules that all others have to comply with, now we find that whilst we all have to pay our tax on these tough trading times Nero do not.”
“The question has to be asked, What is going on with this company? Surely we cannot continue with them in our town.”
The complex corporate structure of Caffe Nero is as follows:
- Saratoga Limited (ultimate holding company), Isle of Man
- owns Rome Holdco Sarl, Luxembourg
- owns Rome Intermediate Holdings Sarl, Luxembourg
- owns Rome Topco Limited
- owns Rome PIK Holdco Limited
- owns Rome Pikco Limited
- owns Rome Bidco Limited
- owns Caffe Nero Group Limited
- owns Nero Holdings Limited (applicant for planning consent)
According to “UK Unquote” the net effect of this structure is that Saratoga owns 60 per cent of Caffe Nero. Saratoga is described as Dr Gerry Ford’s investment vehicle.
Thirty per cent of Caffe Nero is owned by Paladin Partners, a private equity firm co-founded by Dr Ford.
Other investments held by Rome Topco Unlimited (the highest level for which accounts are available at Companies House) at 31 May 2011 were:
- Aroma Limited
- Caffe Nero Ventures Limited
- Caffe Nero Investments Limited
- Nero Coffee Roasting Limited
The group has a 50 per cent interest in Caffe Nero Gida Urunlen AS (‘Caffe Nero Turkey’)
The group also has franchises operating in the Gulf States.
