So you are still taking the line that despite the valid brand value given to the UK subsiduary, and the costs the parent company may incur, and the value to the UK business, the UK business isn't entitled to pay it's parent company and consider that a cost?

To re-visit one of my earlier points, can the UK operation transfer money for buying produce to the parent company and consider that a cost?

Why can't that cost be tax deductable, but the cost of buying (e.g.) coffee beans from the parent company can be?

No posters on this thread have suggested that a business should be able to charge "whatever royalties they want"

What brand value does it give?

If the royalties mean the UK sub. makes a perennial loss, remind me what that "value" is again?

Sal's already explained it.

Would you deem the coffee beans have no value too then?

If you took your emotion about tax avoidance out of this, I don't believe you would try to argue that a brand has no value.

I was thinking of a couple of others posters here, relating their experiences of working in an industry over a number of years, and seeing how the attitude toward customers has changed.

It doesn't have to be "dishonesty", as such, but relates to the entire culture of the customer now being expected to have researched and be an expert in everything they buy, because they cannot rely on a salesperson to necessarily offer the best for them.

We've mentioned it before in relation to financial 'products' for instance.

It's rather surreal, really, to imagine the amount of time one will need to research everything that one might buy in one's life, simply because there is an extent to which companies/banks etc cannot be trusted entirely any more.

No, he didn't.


Hmm. Do coffee beans materialize ready to use in coffee shop premises? Don't think so. Do they need to be grown, processed, packed, transported, delivered etc.? I believe they do.

Having given your question very deep consideration and thought, no, I would not deem the coffee bean to have no value.


Dear fellow, it is hardly a question of 'emotion', now is it? Please be sensible.


You are deliberately obfuscating the point. Which is that if I wanted to run a business and use the Starbucks brand then quite reasonably I would expect to have to pay royalties, if they agreed. Then, as an arm's length transaction, they would have to decide what they wanted me to pay, and I in turn would have to decide if the game was worth the candle.

That is not what is happening here. In essence it is as if I am Starbucks US, and I want to operate as Starbucks UK, but charge myself royalties for using my own brand name. As you, I'm sure, well know.

Is it panto season?



Did the Starbucks brand materialise in the coffee shop premises? Did the UK public magically become aware of it? It needed to be publicised, advertised, protected.


Can you apply the same consideration and thought to the value of the Starbucks brand?




I'm being very clear on the point. Tell me why you would think such royalty charging would be valid in one scenario and not the other.

Is the real difference just that their is more choice now? You didn't need to research different phone deals, savings accounts, power payments, in the past, because there weren't any/many to choose from

I did. I also suggested there is no reason for them to be tax deductible.

In any case the royalties are only supposedly allowed as tax deductible by HMRC if they are deemed essential to the UK companies ability to make a profit. As Starbucks UK makes no profit then the royalties they pay for are clearly not helping them make a profit. In fact they contribute to the loss the company makes.

You can't just set up royalty payments if those payments give you no benefit. The problem lies with HMRC in that it seems obvious this is an abuse of how the royalties are supposed to work and yet they allow it.

And oh, how we suffered.

I was deliberately not just quoting from my own interpretation of my own experience.

As I've said before, I certainly don't think financial institutions are as trustworthy. And I think the choice thing is a fallacy.

For instance, it's a nightmare trying to find a simple, straightforward savings account that pays decently (not wild promises or anything).

Being boringly consistent

I would still say that, in my opinion, much of the 'choice' we have now is not real, meaningful choice. And we know perfectly well that, again, it's a mare trying to work out what is the best way to pay your bills and who to, for instance. And doing things like changing banks for better deals etc is made deliberately difficult (been there etc).

I honestly do not remember anyone complaining that they couldn't choose which water company to pay for their water (or other utility bills). That's subjective – other's may remember differently. But I cannot recall ever having heard comments remotely like that.

I've made the argument before that the massive diminishing of independent retail has reduced meaningful choice – there are reasons that words and phrases such as 'Tescopoly' and 'Tesco Town' have entered the lexicon.

Why do you feel there is no reason for that to be tax deductable, as opposed to other costs?

I hadn't seen anything giving the reason that royalties are deemed tax deductable only on the basis that "they are deemed essential to the UK companies ability to make a profit" If you have seen such information, and you could share it, I'd be happy to read it.



But who has set up royalty payments for something that gives no benefit? The fact that a business isn't making a profit doesn't mean they aren't getting a benefit from their royalties, any more than the aren't getting a benefit from their usage of coffee beans.

Possibly. Starbucks UK could certainly be Baron Hardup, as it makes no money. And you seem to be contributing the buffoon.


Wow, some of these questions are tough. But, I'm guessing not. Am I right?


If Starbucks UK spends publicity money in the UK advertising to the UK consumer this should be tax deductible.

If Starbucks UK needs to protect its brand by trademarking in the UK then ditto though I'm guessing the parent company took out the worldwide protections donkeys ago.


A complete [inon sequitur[/i. You persistently fail to address the simple point that Starbucks is purportedly paying Starbucks for Starbucks' brand. Why this myopia? Starbucked if I know.


What, you need me to explain why it is not valid for me to pay less or no tax, by the ruse of paying royalties to myself? Rather, you explain to me how it is valid. That's the explanation we're missing.

I guess we just didn't know. Up to you how you class that as "suffering" - BT's insistence on fixed phone lines that couldn't be moved, where you couldn't buy your phone and had to rent it and had to pay BT and only BT to have an extention in a different room is something I would regard as a sufferance if it were enforced on us now, but we didn't know any different before the 80s. Likewise our other suppliers that were previously monopolies. We accepted it because we didn't know any different.

I don't know why you have such difficulties getting a savings account by the way. Being a bit slack on these things, I haven't changed my bank current account since I was at school so it's 25 years old. It still pays a little bit of interest and gives me all standard banking facilities. I've got a separate savings account that's been the same one for nine years that pays a little more interest in place of allowing DDs and cheques. That didn't take much expertese to find or set up. I do plan to move that to one that pays a bit more interest, which won't be difficult - just a quick session on the web or glance through the back pages of the Money section of a weekend paper. The ones I looked at but didn't get around to acting on didn't make any wild promises and pay decently compared to the BOE base rate.

Never takes you too long to get to personal insults...and you said this wasn't a question of emotion, but again you are being clearer emotive rather than reasonable.


Glad we agree. So why can't that count as a cost to the business?



And if Starbucks parent spends publicity money that impacts the UK consumer?


And if Starbucks parent takes such actions on a worldwide basis that affects the UK?


If it was a point, I would address it. Do you feel there is an issue with Starbucks UK paying Starbucks parent for the value of the brand, but not for the value of the beans?



Your own tax situation is entirely irrelevant to the validity of a subsiduary paying out to it's parent company.

It's a very old issue - the legal term caveat emptor refers. Having said that consumer law was largely supposed to deal with the issue.

That's pretty random, to pretend you view my satirical metaphor extending your panto imagery as "personal insults". However I note that your skin is about 1% of standard thickness so will avoid anything than could even remotely upset your timorous sensibilities in future, and apologise for an attempt at humour that was beyond your capacity to understand.


"Impacts the UK consumer" in what way, exactly? Are you suggesting that Starbucks USA pays for marketing campaigns in the UK? When did it do that, then?


Absolutely not. Only actions taken in UK law affect the UK.


Without wishing to be any more blunt than is absolutely necessary, I will only say that if you genuinely do not get the distinction I have laboured, then I think there is nothing else a human can say to help you understand it, simple though it be.


Without wishing to be spelling police, can I just point out it's "subsidiary" as your version grates.

That said, and as yoiu wel know, my analogy had nothing at all to do with my tax situation. It was a simple question: "why is it not valid for me to pay less or no tax, by the ruse of paying royalties to myself?" I asked you to explain that analogy to me, and note you either can't, or won't.

A couple of things - if you open a Starbucks and you open Mintball coffee shop next door to each other which do you think will be busiest? and which shop will be charging the most for the same coffee? The brand has value - Starbucks will spend hundreds of millions protecting and developing the brand - that has to be paid for somehow. If it were a stand alone business even FA would accept these marketing costs as legitimate business expenses - but if they are wrapped up in royalties they are not?

Secondly - the royalties will also help to cover the cost of the deals that are conducted by HQ e.g. supply chain, the purchase, manufacturing, packaging and transporting of the coffee will be one central deal - if Starbucks UK had to do this they would incur cost which would be tax deductable. Banking facilities this again will be a a central deal, would Starbucks UK get as good a deal if they were a standalone? Interest is also tax deductable.

Finally there is the position of operating position and actual position. You will struggle to find a large company where there isn't an underlying operating position is the same as the stated results. All large companies have exceptional items that are tax deductable - take BP and the disaster in the Gulf of Mexico - they make have set aside 20bn to cover the cost but in effect that is 14bn because of the tax saving - should the tax payer be funding an error of this nature - makes Starbucks tax avoidance look chicken feed.

It does, that is what the profits do.



So you want Starbucks to charge Starbucks for doing deals that reduce the costs of Starbucks.
The UK arm will be being charged the appropriate costs of the tangible goods it uses.

This isn't about the tangible goods but a made up fee for "brand value"



This isn't about exceptional one off costs it is about fleecing HMRC year on year.

It was really an attempt at humour




I'm suggesting Starbucks are a worldwide brand for which actions taken in one country impact other countries.


Untrue. And see the above.


The fact that you haven't explained well enough why you feel the distinction is relevant is hardly my fault now.



If you were a worldwide corporation, you would have a point. You are not, so you don't. No more than a corporation would if it complained about you avoiding tax by putting money into a pension or using an ISA.

I feel this is our sticking point: Why some feel intra company costs for tangible items can be seen as a tax deductable cost but don't feel the same about intangibles.
I've given and read plenty to show there is value from those intangibles, but haven't yet seen a good argument as to why they should be differentiated from tangible goods in company costs for tax reasons.

Because they are made up to avoid tax?

Given that its perfectly acceptable for any company to avoid making any "profits" and hence avoid paying corporation tax then there is surely a golden opportunity for a person to rent an office on, lets say, Sark (where all the schoolteachers reside), and act as a business centre for every Ltd Company in the UK to have its head office location, leaving the rest of all of the businesses in the UK as subsidiaries of the Sark operation and to be charged a licence or franchise levy to operate on the mainland, such levy being approximately the same amount as this years nett profit ?

Is it worth me seeking out such office space and buying lots of post boxes, they don't have to be real ones do they, can they be virtual post boxes or do I have to cover the island in them ?

You'd need a registered office and corresponding nameplate. Just look outside any Channel Islands based lawyer's office

And a good one, if wasted on you.


No, you're avoiding my question. Again.

.
What is untrue? That intellectual rights protection NOT taken out under in UK law nevertheless applies to the UK? That's a wild one, even for you. You should offer to do legal advice for Starbucks, they could have saved the money they've wasted on registering 20 UK trade marks.

.
Oh but I have. The only reason you are pretending it has "not been explained well enough" (

) is to avoid having to admit that I am obviously right.


My, you're quite the expert on straw men. But thanks for unwittingly conceding the argument. The point is, indeed, that Starbucks trade in the UK is absolutely part of the business of a "worldwide corporation", and therefore it is paying royalties to itself. Well done!