Member Article

McDonald’s to pay UK tax on £800m-worth of European royalties

US fast food chain McDonald’s has announced it is to move its non-US tax base to the UK in a move that marks the end of its controversial Luxembourg tax structure.

It means the global food brand’s $1bn (£800m) of European income from franchise and royalty fees will now pass through the UK, with the corporation paying UK tax on its takings.

The restaurant chain said the restructure would make its operations ‘administratively simpler’ and ‘enhance flexibility’, but it comes after the European Commission announced it was investigating the firm’s tax arrangements in the tax haven on Tuesday.

Allegations centre around whether a deal McDonald’s struck with the Grand Duchy in 2009, which saw the creation of McDonald’s Europe Franchising Sarl (MEF), amount to illegal state aid after the US giant paid tax of just $3.8m according to its latest accounts.

McDonald’s said that its Luxembourg operations would continue to operate its restaurants in the country, but that ‘other functions will transfer to the new UK-based holding company’, with the UK’s relatively low corporation tax at 20%, and soon to drop to 17%, likely to have been a motivating factor.

Following the announcement, Prime Minister, Theresa May’s spokeswoman said: “We welcome continued investment from companies around the world into the UK, particularly where that’s securing growth and increasing jobs.”

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