A four-month investigation by news agency Reuters discovered that Starbucks was able to cut income tax by paying fees to other parts of its global business, such as royalty payments for use of the brand. This means Starbucks UK is effectively making a loss and therefore does not have to pay any corporation tax. As a result, it has not broken any law.
But Labour MP and tax campaigner Michael Meacher said Starbucks' practice is "profoundly against the interests of the countries where they operate and is extremely unfair... they are trying to play the taxman, game him. It is disgraceful".
The most recent results, posted for 2011, show Starbucks UK recorded a loss of £33 million. But it is understood that Starbucks has told investors the business is profitable.
The second largest restaurant or cafe chain in the world, after McDonalds, paid £26 million in royalties and licence fees to let the UK coffee houses use its labelling. It does this by registering the intellectual property rights to another division of the company.
An HMRC spokesman said: "For legal reasons, we cannot comment on the tax affairs of individual businesses, but we make sure that multinationals pay the right tax to the UK in accordance with UK tax law. Our tax rules combat tax avoidance and we employ specialist tax professionals to ensure that multinationals play by the rules."