‘Google Tax’ on Corporations Yields $178 Million for U.K. in 2016

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By Ben Stupples

The U.K’s “Google tax” on the profits of large multinational companies directly yielded 138 million pounds ($178.4 million) during the latest financial year, according to government data.

In total, the U.K. tax authority raised 281 million pounds from its diverted profits tax (DPT) for the year ending March 31, 2017, according to its 2016-17 annual report, released July 13. The remaining 143 million pounds came from extra receipts from companies changing their tax planning due to the DPT, it said.

The U.K. introduced the DPT—known as the Google tax—in 2015 amid concern that Google parent Alphabet Inc. and other global tech companies were engaging in tax planning to shift their profits to offshore havens. It sets a 25 percent levy—higher than the country’s current corporate tax rate of 19 percent—on any profits Her Majesty’s Revenue and Customs deems to have been improperly moved out of the U.K.

The DPT “is an important measure for HMRC and is designed to encourage behavioural change in businesses,” HMRC said in its 2016-17 annual report. “Last year diverted profits project teams developed new innovative ways of identifying, risk assessing and investigating profit,” it added.

Multinational DPT Battles

The annual statistics come as large multinationals with U.K. operations battle HMRC over the DPT.

Diageo Plc, the London-based alcoholic beverage company behind brands such as Johnny Walker and Smirnoff, said May 10 it had received a DPT notice from HMRC that sought to recoup 107 million pounds.

London Stock Exchange Group Plc, Europe’s second-largest stock exchange, warned March 3 it has an accounting provision of 4.5 million pounds due to “uncertain tax positions” that included the tax.

Switzerland-based conglomerate Glencore Plc, meanwhile, is planning to appeal the U.K. High Court’s refusal to grant it permission to apply for a judicial review of a21.3 million pound DPT charge from HMRC.

Diageo, one of the world’s biggest distillers, said May 10 it “does not believe” it falls in the scope of the DPT. To challenge HMRC’s assessment, companies must pay the assessed total and then work with the tax authority to resolve the issue. Diageo has made “no provision” for the DPT in its dispute, it said May 10.

Accelerated Payment Notices

In addition to the DPT it has collected, HMRC said in its annual report that it sent out more than 30,000 accelerated payment notices to taxpayers, totaling 1.3 billion pounds.

Introduced in 2014, APNs force taxpayers to pay disputed amounts of tax to HMRC within 90 days. They are one of the “most significant” tools for tackling avoidance by individuals and companies, HMRC said. Around 90 percent of issued APNs have been upheld as valid, it added.

Overall, HMRC’s total tax yield in 2016-17 increased by 7.1 percent, to 574.9 billion pounds. Making up 9 percent of the total revenue collected, corporate tax receipts increased 12.3 percent due to rising company profits.

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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