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Diageo challenges £107m tax bill

Published:  12 May, 2017

HMRC has ordered spirits giant Diageo to pay a whopping tax bill of £107m as part of an investigation into ‘diverted profits’.

The issue, which is being disputed, relates to profits that have been moved by Diageo between its offices in the UK and the Netherlands for the two financial years to June 30, 2016.

Diageo was handed the bill after HMRC concluded that the company was in breach of Diverted Profits Tax regime, which has been regarded as a government crackdown on multinationals.

Diageo is challenging the ruling, although it will have to pay the bill up front before taking the issue to appeal.

In a statement, the Smirnoff producer said it did “not believe that it falls within the scope of the new Diverted Profits Tax regime”, adding that the payment of the sum was “not a reflection of Diageo’s view on the merits of the case”.

The regime was introduced in April 2015 with the objective of recouping tax from companies like Google and Facebook which are notorious for diverting profits to countries which have differing tax legislation to the UK.

It levies a 25% charge on taxable profits that have been diverted from the UK.

In Google’s case, it agreed a deal with the British tax authorities to pay a relatively small sum of £130m in back taxes after diverting its UK revenues through its European headquarters in Ireland for a number of years.

Diageo concluded its statement by asserting that it does not expect the situation to have an effect on its tax for the current financial year to June, which it expects to be to be 21%.