McDonald’s Dodged Millions in Taxes with an IOU to Itself

by Vins
Published: Last Updated on

Reporting by War on Want and The Independent in March 2022 revealed that McDonald’s employed various financial tricks, including a circular IOU transaction, to avoid paying at least 400 million dollars in United Kingdom taxes over ten years. Between November 2016 and July 2017, a McDonald’s subsidiary based in the United Kingdom bought the rights to collect McDonald’s franchise fees in Asia and some other non-American countries from a McDonald’s subsidiary in Singapore. The franchise fees cost $3.55 billion, broken down into $2.05 billion for the intangible assets and $1.57 billion for goodwill.

Instead of paying this amount using money, the UK McDonald’s subsidiary used three loan notes, similar to an IOU, and wrote this off as an expense. The notes were then passed from one McDonald’s subsidiary in Singapore to another, where yet again no tax was paid because of Singapore’s tax code. Next the notes were sent to a McDonald’s subsidiary in Delaware, which sent them back to the McDonald’s subsidiary in the UK that had originally issued them. Since an entity cannot owe itself money, the loan notes were promptly canceled. The UK McDonald’s subsidiary in essence got the rights to collect franchise fees while spending no money and paying no taxes. In fact, even though the UK McDonald’s subsidiary had a revenue of $493 million in 2018, it claimed that the franchise fees it acquired through the circular transaction scheme amortized, basically depreciated, by $283 million, and so it paid no taxes in the UK that year.

At the United Kingdom’s current tax rate of nineteen percent, this entire scheme means that McDonald’s UK is likely to avoid around $400 million in taxes over the next decade, due to its claimed depreciation of the rights it acquired alone.

Before this transaction, McDonald’s had used its subsidiaries in Luxembourg and Switzerland to dodge over a billion euros worth of taxes across Europe between 2009 and 2013. When the European Commission investigated, they found that McDonald’s practices were unfair but not technically illegal. This same UK McDonald’s subsidiary bought a total worth of $12 billion assets from another European McDonald’s subsidiary, reportedly using loan notes and a circular transaction, wherein the loan notes were returned to the UK subsidiary and canceled.

As of April 2022, no corporate outlets have reported on this story.


“Secrets and Fries: McDonald’s £295 Million Tax Dodge”, War on Want, March 17, 2022.

Owen Espley, Joan Moriarty, and Jason Ward, “Secrets and Fries: How McDonald’s Abuses the UK Tax Regime to Dodge Its Global Taxes, War on Want, March 15, 2022.

Ben Chapman, “McDonald’s ‘Dodged Tax’ While Claiming £872M in COVID Support,” The Independent, March 17, 2022.

Student Researcher: Annie Koruga (Ohlone College)

Faculty Evaluator: Mickey Huff (Diablo Valley College)