Diageo forced to pay £107m ‘Google Tax’

Diageo is being forced to pay £107 million to the UK tax authorities (HMRC) as part of Britain’s efforts to force global companies to pay a reasonable amount of tax in relation to their operations in the UK.

Dubbed the “Google Tax”, the Diverted Profits Tax regime was introduced by ex-Chancellor George Osborne in 2015. Although he did not name the internet giant directly, the rule acquired its nickname following political outrage over the tech firm’s tax arrangements, which saw it divert its UK revenues through its European headquarters in Ireland and pay negligible sums to the UK government.

In a statement Diageo said that under the Diverted Profits Tax regime, HMRC will ask for more tax and interest for the past two financial years. The system forces a company to pay any tax in question plus a 25% charge and then argue its case to have it refunded.

Diageo said: “The payment of this sum is not a reflection of Diageo’s view on the merits of the case and, based on its current assessment, Diageo considers no provision is required in relation to Diverted Profits Tax.”

The company does not expect the situation to have an effect on its tax for the current financial year to June, and expects the rate to be 21%.

The dispute centres on profits that have been moved between the UK and the Netherlands, where Diageo employs 220 people.

The company said: “Diageo does not believe that it falls within the scope of the new Diverted Profits Tax regime.”