McDonald’s to bring its international tax base to Britain

The fast-food giant has chosen the UK to establish a new holding company to collect hundreds of millions of pounds a year in royalties from its international franchise operations.

Announcing a radical shake-up to its corporate structure, central to which is shifting its tax domicile from Luxembourg to the UK, the company backed Britain’s prospects post-Brexit, saying its strengths would endure after it leaves the bloc.

“The reasons for changing the location of the corporate structure to the UK were sound before Brexit and remain so beyond it. These strengths are unlikely to change as the UK negotiates leaving the European Union,” a McDonald’s spokesman told The Telegraph.

McDonald’s is the latest multinational company to up its invest in the UK since June’s Brexit vote, following a string of technology giants including Apple, Google and Facebook.

The announcement was welcomed at No 10, with the Prime Minister’s spokesman saying continuing investment by international companies would secure growth and boost jobs.

McDonald’s new UK domicile will collect the majority of the royalties from licensing the company’s global intellectual property rights outside the US and will be supported by the “significant number of staff” the company already employs in the capital.

“This change has a clear business rationale in matching our corporate structure to our new functional structure,” the company spokesman added.

The UK already has one of the lowest corporate tax rates among major economies at 20pc, compared with 35pc in the US, 33pc in France and a combined burden on profits in German of between 30pc and 33pc.

McDonald’s move to Britain, its biggest European market, comes as complex international tax structures come under pressure from coordinated moves to ensure profits are taxed where they are made.

In recent years Britain has thrown its weight behind moves by the Organisation for Economic Co-operation and Development to stamp out complicated tax avoidance schemes.

The move has however been viewed by some as a rebuke to the EU, which is investigating the chain’s tax affairs and could yet demand nearly $500m (£397m) in back taxes.

EU officials have claimed McDonald’s Luxembourg structure, agreed with the Grand Duchy’s government, amounted to illegal state aid.

The EU has been grilling the burger giant as part of a crackdown on member states offering tax incentives for companies to set up shop.

McDonald’s denies claims that it has avoided tax, saying that between 2011 and 2015 it paid more than $2.5bn in corporate taxes in the EU, at an average tax rate approaching 27pc.