• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
  • Our Commercial Technology team has established itself as one of the strongest in the UK. We are ranked in Legal 500, Chambers & Partners and PLC Which Lawyer, with four of our partners recommended.
  • Our team provides practical and commercial advice founded on years of experience and technical know-how to technology and digital media companies that need to be alert to the rules and regulations of competition law.
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  • Our litigation practice advises on all aspects of dispute resolution, with a particular focus on ownership, exploitation and infringement of intellectual property rights and commercial disputes in the technology sector.
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  • With a service that is commercial and responsive to our clients’ needs, you will find our tax advice easy to understand, cost-effective and geared towards maximising your tax benefits.
  • At Kemp Little, we advise clients in diverse sectors where technology is fundamental to the ongoing success of their businesses.They include companies that provide technology as a service and businesses where the use of technology is key to their business model, enabling them to bring their product or service to market.
  • We bring our commercial understanding of digital business models, our legal expertise and our reputation for delivering high quality, cost-effective services to this dynamic sector.
  • Acting for market leaders and market changers within the media industry, we combine in-depth knowledge of the structural technology that underpins content delivery and the impact of digitisation on the rights of producers and consumers.
  • We understand the risks facing this sector and work with our clients to conquer those challenges. Testimony to our success is the continued growth in our team of professionals and the clients we serve.
  • We advise at the forefront of the technological intersection between life sciences and healthcare. We advise leading technology and data analytics providers, healthcare institutions as well as manufacturers of medical devices, pharmaceuticals and biotechnological products.
  • For clients operating in the online sector, our teams are structured to meet their commercial, financing, M&A, competition and regulatory, employment and intellectual property legal needs.
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  • The mobile and telecoms sector is fast changing and hugely dependent on technology advances. We help mobile and wireless and fixed telecoms clients to tackle the legal challenges that this evolving sector presents.
  • Whether ERP, Linux or Windows; software or infrastructure as a service in the cloud, in a virtualised environment, or as a mobile or service-oriented architecture, we have the experience to resolve legal issues across the spectrum of commercial computer platforms.
  • Our clients trust us to apply our solutions and know-how to help them make the best use of technology in structuring deals, mitigating key risks to their businesses and in achieving their commercial objectives.
  • We have extensive experience of advising customers and suppliers in the retail sector on technology development, licensing and supply projects, and in advising on all aspects of procurement and online operations.
  • Our legal professionals work alongside social media providers and users in relation to the commercial, privacy, data, advertising, intellectual property, employment and corporate issues that arise in this dynamic sector.
  • Our years of working alongside diverse software clients have given us an in-depth understanding of the dynamics of the software marketplace, market practice and alternative negotiating strategies.
  • Working with direct providers of travel services, including aggregators, facilitators and suppliers of transport and technology, our team has developed a unique specialist knowledge of the sector
  • Your life as an entrepreneur is full of daily challenges as you seek to grow your business. One of the key strengths of our firm is that we understand these challenges.
  • Kemp Little is trusted by some of the world’s leading luxury brands and some of the most innovative e-commerce retailers changing the face of the industry.
  • HR Bytes is an exclusive, comprehensive, online service that will provide you with a wide range of practical, insightful and current employment law information. HR Bytes members get priority booking for events, key insight and a range of employment materials for free.
  • FlightDeck is our portal designed especially with start-up and emerging technology businesses in mind to help you get your business up and running in the right way. We provide a free pack of all the things no-one tells you and things they don’t give away to get you started.

Starbucks and Tax

The most recent company to attract unfavourable scrutiny of its UK tax profile is Starbucks.

The revelation came courtesy of Reuters, which revealed that despite £3 billion worth of sales in the UK over the last 14 years, Starbucks has paid only £8.6 million in tax.  Further, in the last three years, Starbucks had sales totalling £1.2 billion but reported no profit and paid no corporation tax at all.  How is this possible?
 
In Starbucks’ case, the significant difference between sales and taxable profits arose because a number of payments were made by Starbucks UK to other Starbucks companies located in various countries outside the UK, which completely eliminated any profits.  These payments work in three ways:
  1. Starbucks UK pays royalties to another Starbucks company in the Netherlands for the use of its intellectual property, such as the brand and its business processes;
  2. payments were also made to a Swiss company for the purchase of coffee beans; and
  3. The UK operations are funded by high cost debt, which results in significant payments of interest being made to other group companies.
Starbucks has not broken the law in making these payments, and in fact, inter-company payments of this type are not unusual within multi-national groups.  However, to avoid paying tax in the UK the payments must be tax deductible, which requires the payments to be calculated on a commercial basis, applying a commercial rate which is similar to that which it would pay to an unconnected third party. 
Questions have been raised on the level of these payments – with a suggestion by some commentators that the payments may exceed what might be considered “reasonable” in the circumstances.
 
The suggestion of excessive inter-company charges was raised particularly in relation to the royalty payments for the use of the intellectual property.  According to Reuters, Starbucks UK paid an amount equal to 6% of the total sales made in the UK in royalties and licence fees for the right to use the Starbucks brand in the UK.    This level of royalty payments does appear somewhat steep, especially given Reuters understanding that McDonalds charges its UK operations a significantly lower rate of royalties (4% – 5%) for the use of its brand.
 
Questions have also been raised as to the level of interest paid on the inter-company debt – with Reuters reporting that Starbucks UK pays interest at LIBOR plus 4 percentage points, with both KFC (LIBOR plus 2 percentage points) and McDonalds (LIBOR or below LIBOR) charging significantly less interest on their inter-company debt.
 
Ultimately, the reasonableness of the inter-company payments is a question for the UK tax authorities, and it would appear they are satisfied that the inter-company charges have been made on a commercial basis.
 
This current debate may force a review of the way in which multi-nationals are subject to tax.  There is a perception that it is too easy for a multi-national to structure its operations to avoid paying tax in high tax jurisdictions, by shifting its income to low tax countries through the use of inter-company charges – such as the inter-company charges used by Starbucks.  A change in the way multi nationals are taxed may be achieved by aligning tax payments with economic activity – perhaps applying a formulaic approach to allocate income to the countries where they do business.  Such an approach will require the agreement of a number of countries, and is unlikely to happen in the immediate future.
 
In the meantime, it will be left to the individual tax authorities to ensure that multi-nationals pay their “fair amount” of tax in each country – perhaps spurred on by the outrage of the press and the politicians.
 
For more information please contact Michael Cashman.