Diageo told to pay £107m in extra tax in profits row

Diageo has been ordered to pay £107m by the UK tax authority as part of a long-running investigation into moving profit between its global businesses.

The drinks giant said that under the new Diverted Profits Tax regime, HMRC will ask for more tax and interest for the past two financial years.

Diageo said it would challenge the HMRC's assessment.

However, the company said it will have to pay £107m then work with HMRC to resolve the issue.

Diageo, which owns brands including Johnnie Walker whisky and Tanqueray gin, 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.

The Diverted Profits Tax regime was introduced in 2015 and levies a 25% charge on taxable profits that have been diverted from the UK.

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

Shares in Diageo fell 1% to £22.68 on Wednesday but have risen more than a fifth this year.