OUR APPROACH TO TAX IN THE UK
We are an entrepreneurial group of high quality, Italian style coffee bars, headquartered in London. We have led the espresso revolution in the UK and created a unique award-winning coffee blend. To date, we have opened more than 670 coffee houses across the UK, with aspirations to open many more, and are recognised for serving ?the best espresso this side of Milan?.
In an environment of increased tax transparency, we aim to demonstrate responsible tax management, including paying all UK taxes our business is eligible to pay, which has been determined through our regular dialogue with HMRC.
Our approach to tax is in line with our ethical approach, which is to think responsibly about our business and everything we do.
Our ethical approach has led us to:
- achieving zero waste to landfill in London since 2010. We also recycle our coffee grinds, we are introducing paper straws and we are currently working to recycle our paper coffee cups;
- buying our beans directly from farmers and working with the Rainforest Alliance to do so;
- supporting coffee farmers directly in their communities through a variety of sustainability, education, medical and clean water projects;
- establishing the Caffè Nero Foundation which helps our store team members raise funds for local communities and fund dozens of local charity projects throughout the UK;
- contributing funds for greater humanitarian needs such as helping to fund a hospital for Syrian refugees and rebuilding a primary school devastated by a natural disaster.
OUR TAX CONTRIBUTION
Our total tax contribution in the UK amounted to over £60m in the year to 31 May 2017, which is an increase of approximately 8% over the previous year. This tax contribution consists of the taxes that are borne by Caffé Nero such as the business rates that we pay on our stores and the employer?s national insurance contributions that we incur. It also reflects the taxes that we collect as a result of our investment in the UK and includes the VAT that is charged on sales to customers and the PAYE that is deducted on staff salaries. Every year we pay to UK government entities substantial amounts across numerous areas, including:
Our tax contribution forms only part of our economic contribution to the UK, and we are proud to have created 397 new jobs in the UK and Ireland, opened 33 new stores and trained over 421 apprentices in the year to 31 May 2017. In fact, over the last three years we have created more than 1000 new jobs in the UK.
HOW WE GOVERN OUR TAX AFFAIRS
Our Board of Directors is accountable for how we approach our tax affairs and our Group Finance Director, who sits on the Board, is responsible for ensuring that the approach set by the Board is implemented within our business. The Group Finance Director is supported by the UK Finance Director and an experienced wider finance team.
The entire UK finance team is based in a single location, which enables a strong culture of knowledge-sharing and risk management. Tax governance procedures, including accountabilities, responsibilities and delegations of authority are clearly defined and set out how tax activities are carried out within the group. This helps to ensure all those with tax responsibilities are aware of business changes and other activities that may have a tax impact.
We are subject to the Senior Accounting Officer legislation. This legislation requires us to ensure that we have appropriate processes and controls in place over our UK tax affairs.
OUR ATTITUDE TO TAX PLANNING AND TAX RISK
We are committed to paying the correct amount of tax and at the correct time, in accordance with the tax laws of the territories in which we operate, including the UK.
We seek to ensure that our tax affairs are aligned to economic activity. This means that all tax decisions are made in response to commercial factors, with our tax liability being the outcome rather than driver of business decisions.
Historically, we have been loss making for UK corporation tax purposes. This has been due to interest payments on debts which are owed to third party commercial banks, who have loaned money to our business and helped us to grow. By incurring these debts as well as using money generated by the business to fund our expansion rather than paying down debt, we have consistently generated significant new job figures across the UK (over 1,000 in the last three years). However, this has resulted in the business not achieving sufficient profits to pay UK corporation tax in respect of the accounting period ended 31 May 2017.
It should be noted that we have never used any tax avoidance mechanisms to reduce our tax exposure in the UK. We have never taken any UK tax deductions in respect of shareholder loans (or other parental instruments) and there are no arrangements of any kind to minimise our UK tax exposure. Indeed, our approach to tax has been confirmed via routine regular discussions with HMRC in a fully transparent manner.
Like any business, we have a responsibility to our shareholders to appropriately manage our tax costs. We therefore seek to adopt relevant UK tax incentives as outlined by HMRC.
We are risk averse with regards to our tax affairs and are thus not prepared to tolerate significant tax risk. We apply diligent professional care and judgement as part of our UK tax compliance obligations, including ensuring that all decisions are considered at an appropriate level. Further to this, in order to minimise the risk of uncertainty on the application of tax laws, we seek professional third party advice.
OUR APPROACH TO WORKING WITH HMRC
We seek to work positively, pro-actively and transparently with HMRC.
In the UK, we are in regular contact with our Customer Compliance Manager at HMRC to discuss significant tax developments and business changes.
We actively seek to discuss significant uncertainties on the application of tax laws with HMRC to ensure that we are meeting our UK tax obligations.
This tax strategy has been prepared in accordance with the requirements of paragraph 19(2) contained in Schedule 19 of the Finance Act 2016 in respect of all the Caffè Nero companies incorporated in the UK for the financial year ending 31 May 2018.
Our tax strategy was approved by The Board on 30 May 2018.