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Diageo Reveals Tax Disputes In France, UK

by Ulrika Lomas,, Brussels

17 August 2017

Global beverages company Diageo has said that it is in discussions with the French and British tax authorities over the deductibility of interest costs and a Diverted Profits Tax liability.

The company disclosed in its latest annual results that the French tax authorities intend to deny tax relief for certain interests costs, which relate to periods from July 1, 2011, and that it will contest such a decision.

"Diageo believes that the interest costs are deductible and accordingly intends to challenge any such assessment from the French tax authorities," the company said.

However, at this stage of proceedings, the firm is unable to put a "meaningful" figure of the amount of back tax at stake.

The report also revealed that Diageo has "entered into a process of collaborative working," with the United Kingdom tax authority, HM Revenue and Customs (HMRC), in an attempt to clarify transfer pricing and related issues. These discussions "are ongoing," the company added.

According to Diageo, on June 2, 2017, HMRC issued the company with preliminary notices of assessment under the new Diverted Profits Tax (DPT) regime, which came into effect in April 2015. These require the firm to pay total additional tax and interest of GBP107m (USD138m) for the financial years ended June 30, 2015, and June 30, 2016.

The company also intends to challenge this assessment, because it does not believe that it falls within the scope of the DPT regime.

Before it can appeal the UK DPT assessment, Diageo will have to pay the full amount at issue, although the company stressed that this payment is "not a reflection of Diageo's view on the merits of the case," it said.

"Based on its current assessment, Diageo believes no provision is required in relation to Diverted Profits Tax," it added.

The DPT is intended to counter aggressive tax avoidance by multinational companies in the UK. It is charged at a rate of 25 percent (compared with the current corporate tax rate of 19 percent) on all profits "artificially" diverted from the UK.

TAGS: tax | interest | corporation tax | United Kingdom | tax authority | transfer pricing | France | Tax

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