Diageo reported in its interim results for the six months to 31 December 2016 released on 26 January 2017 that Diageo had been discussing its transfer pricing position and related issues with HM Revenue & Customs, the U.K. tax authority, and that it had entered into a process of collaborative working to seek clarity on those issues. Those discussions are ongoing.
Further to this, Diageo has learned today that HM Revenue & Customs intends to issue preliminary notices of assessment under the new Diverted Profits Tax regime, which came into effect in April 2015. Diageo understands that this will require Diageo to pay additional tax and interest of approximately £107 million in aggregate for the financial years ended 30 June 2015 and 30 June 2016.
Diageo does not believe that it falls within the scope of the new Diverted Profits Tax regime. Accordingly, Diageo will challenge the assessments when they are received. In order to do this, it will be necessary to pay the full amount assessed up front and then continue to work to resolve this matter with HMRC. 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.
This issue does not change Diageo’s expectation that the tax rate before exceptional items for the year ending 30 June 2017 will be approximately 21%.
This announcement contains inside information.
The person responsible for arranging the release of this announcement on behalf of Diageo is John Nicholls, Deputy Company Secretary.