Controversy over low levels of UK tax paid by multinationals does not justify a change in the law, says expert.

A Reuters enquiry has revealed that retailer Starbucks has paid only £8.6 million in corporation tax since it opened in the UK in 1998 and in recent years has paid no corporation tax, despite having sales of £1.2 billion in the UK over the past three years.

Starbucks' UK accounts show that it is making a loss in the UK. Factors that have contributed to the loss include royalty payments and interest on loans from overseas group companies.

The Starbucks UK operation pays a royalty fee of 6% of total sales for the use of intellectual property such as the Starbucks brand. The fee is paid to Starbucks European headquarters, Starbucks Coffee EMEA BV, based in Amsterdam.

Heather Self commented "in principle a royalty paid by Starbucks UK for the use of the name is no different from a small business deciding it is worth paying a franchise fee to the owner of a brand, rather than setting up as an independent". She pointed out that "Subway charges its franchisees an eight per cent royalty".

The Reuters report states that Starbucks buys coffee beans for the UK through a Swiss company in the Starbucks group, Starbucks Coffee Trading Co. These beans are then roasted at a subsidiary which is based in Amsterdam.

Royalty and interest payments and payments for raw materials, such as coffee beans, are usually deductible from a UK company's profits for corporation tax purposes. However transfer pricing legislation can apply to prevent or restrict a tax deduction where goods or services are supplied between group companies. The rules, which are designed to prevent the diversion of profits from high tax jurisdictions to low tax jurisdictions, such as Switzerland, allow a tax deduction only for the 'arm's length' price of the goods or services.

Following the revelations there have been calls for the law to be changed to ensure that multinationals pay more UK tax in respect of profits from their UK operations.

However, Heather Self said that the existing transfer pricing rules law do not allow deductions for excessive payments to other group companies. She suggested that there is no need to change the law. However she added that “HMRC needs the skills to assess the information it is being presented with.”

Information disclosed by HMRC under a freedom of information (FOI) request from Pinsent Masons in August 2012 showed that foreign-owned companies were responsible for 44% of the £25 billion revenue "under consideration" by the department's Large Business Service (LBS). Tax expert Jason Collins of Pinsent Masons said at the time that this proved that the department "actively targets" foreign-owned companies to see if they owe any extra tax.

Kris Engskov, Managing director of Starbucks Coffee UK responded to the controversy by saying in a blog on the company's website "I want to personally assure you that Starbucks pays and will continue to pay our share of taxes in the UK to the letter of the law. We always have and always will".

There have been calls from commentators on twitter and on the blog on the Starbucks website for a boycott of Starbucks' shops in protest at the disclosures.

Senior HMRC officials are giving evidence about tax avoidance to the Public Accounts Committee next month. They are likely to be questioned by MPs about the tax paid by foreign owned multinationals, such as Starbucks.