The British arm of McDonald’s paid £123m for “franchise rights” last year, as part of a controversial structure that is under investigation for enabling unfair tax avoidance.

The European Commission launched a probe last year into whether Luxembourg’s tax arrangements for McDonald’s amounted to illegal state aid, as part of a broad crackdown on companies that route money through subsidiaries to cut their global tax bills.

Luxembourg-based McD Franchising Europe, which employs 14 people, reported turnover of $1bn and profits of $540.6m last year from royalty payments generated around the region. The European Commission has said that it has “virtually not paid any corporate tax in Luxembourg nor in the US on its profits since 2009”.

The UK business paid out “franchise rights fees” amounting to a third of its overall operating profits for last year. It is thought the fees were paid to the Luxembourg firm. It then reported pre-tax profits of £270.8m, resulting in a UK tax bill of £55.9m. The franchise fee has risen from £114m during 2014.