Business

Caffe Nero accused over tax affairs in viral letter

Caffe Nero cafe
Image caption Caffe Nero has previously said interest payments on its debt mean it does not have to pay corporation tax

Caffe Nero has refused to comment on a letter that has gone viral on social media accusing it of failing to "pay its dues" by avoiding corporation tax.

The letter was sent to the firm by a customer, Steve Pottinger, who said its approach to tax "sticks in the craw".

Caffe Nero, which has more than 500 UK cafes, made a pre-tax profit of £21.1m in 2013 and paid no corporation tax.

A spokeswoman said there were "lots of things" in Mr Pottinger's letter that were "factually incorrect".

Image copyright Steve Pottinger
Image caption Mr Pottinger said he wanted to make his anger known

Asked what these were, she said: "We don't want to get into it."

Caffe Nero has rejected similar accusations previously, saying tax-deductible interest payments on debt used to buy the business mean it has not been liable for corporation tax.

Austere times

Mr Pottinger, 51, who works in the music business and is also a poet, wrote to Caffe Nero last week, posting a photograph of the letter on Twitter.

In it, he said that the corporation tax Caffe Nero had avoided could have been used to pay for public services.

He said: "I'm aware that what you do is perfectly legal... but at a time of austerity when vital services face cutbacks, it sticks in the craw.

"Loyalty cuts both ways. But you seem to have a disconnect when it comes to your responsibilities to paying your dues.

"We're all in this together, and without a vibrant and cohesive society - which tax revenues help maintain - you've nowhere to sell your goods.

"At the moment, you're choosing to ignore that. Until such time as you start showing the same loyalty to the common good that you expect your customers to give to your business, I'll be buying my coffee elsewhere."

'The right thing'

Images of Mr Pottinger's letter and a half-full loyalty card he enclosed with it have since circulated widely on Facebook and Twitter.

Mr Pottinger told the BBC: "Writing the letter seemed the right thing to do. I wanted to make my fury known."

Image copyright Unholy Racket
Image caption Mr Pottinger said finding his letter going viral had been "slightly bewildering"

He initially shared his letter with friends on social media but it soon took off, gaining a much wider readership and approving comments from several public figures.

"It's slightly bewildering," he said. "And very weird to find yourself responsible for something that's gone viral."

Consumer backlash

Caffe Nero has previously rejected accusations that its complex corporate structure involving various holding companies is designed to avoid corporation tax.

Chairman and chief executive Gerry Ford said its decision to base a holding company in Luxembourg "wasn't set up as a financial engineering thing".

Accounts for the privately-owned firm filed to Companies House show that it has paid no corporation tax in the past two financial years.

The BBC understands that tax-deductible interest payments on the company's debt are made to UK banks and the company does not engage in transfer pricing.

Transfer pricing has become associated with controversial tax avoidance schemes. It is where one division of a multinational in one country charges another in a different tax jurisdiction for a product or service.

There is no suggestion that Caffe Nero has done anything illegal.

But Mr Pottinger's viral letter is the latest instance of a consumer backlash against a company over its tax affairs.

More tax

Starbucks, Google and Amazon have also faced criticism.

Last month, Starbucks said it was moving its European head office to the UK from the Netherlands following a row over tax avoidance.

The move will mean the company pays more tax in the UK, it said.

Caffe Nero said its customer services department was now drafting a reply to Mr Pottinger.

Mr Pottinger said the response to his complaint had already "exceeded my wildest expectations".

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