The annual harrumphing of indignation about Caffe Nero's tax affairs has arrived. Yet again:
Furious MPs last night accused Caffe Nero of gaming the system after it emerged the company did not pay a penny of corporation tax yet again last year.
Despite making a profit of £25.5million, the British-based firm avoided a £5.1million tax bill after claiming its holding company made a £24million loss.
Company filings revealed the coffee chain racked up £257.6million in sales in the year ending May 31, 2016, up almost 7 per cent on the year before. The firm, which has 613 shops in the UK and Ireland, has not paid UK corporation tax since 2007 despite generating more than £1billion in sales over that period.
That other notorious tax dodger, Google, runs an interesting little free to use service and entering "cafe nero tax" into it returns, on that first page of results, some interesting stories. In the Mail, early March 2016. June 2015. And so on back to 2012 when all was revealed:
However, Rome Pikco did not pay any corporation tax, because of the interest it is paying due to its debt structure. The accounts say it is the first year Rome Pikco has made a pre-tax profit, on which corporation tax would become payable.
Rome Pikco was created as a holding vehicle in early 2007 after Mr Ford led a buy-out of Caffe Nero for £225m. It had previously been listed on the London Stock Exchange.
In each of the previous years – from May 2007 to May 2011 – Rome Pikco has made a pre-tax loss.
The accounts show that at the end of May, Rome Pikco had £375.7m of gross debt, including a £179.1m fixed rate loan from its parent company.
In addition, the firm’s debts include bank loans of almost £100m, a mezzanine loan – part debt, part equity – of £50m and £49m of “payment in kind” (PIK) notes. These are issued by the company, usually to shareholders, and usually carry a high rate of interest.
In the accounts, the company confirms that as a result of the reduction in interest rates on shareholder loans – thought to include the PIK notes – a £62.6m credit was transferred to the May 2012 profit and loss account.
Due to the amount of debt, Rome Pikco spent £37.9m in interest and financing costs.
The current owners of the company bought it with debt. There is interest to pay upon that debt. And corporation tax is a tax upon profits. The reason Caffe Nero does not pay corporation tax is because it does not make a taxable profit.
This information is readily available, seems simple enough to us and has been that easily available for half a decade now. But this simplicity seems to escape those MPs who actually make the laws on such subjects.
Don't we deserve to be ruled by people rather better than this? Rather better informed at least?