Diageo to Dispute HMRC's Preliminary Notices of Assessment

Diageo PLC (DGE.LN) said Wednesday it will oppose an additional 107 million pounds ($138.6 million)in taxes and interest if imposed by the U.K. government.

Earlier this year, the alcoholic beverages maker said it had been discussing its transfer pricing position and related issues with HM Revenue & Customs, the U.K. tax authority. For taxing purposes, transfer pricing occurs when two units of the same company trade with each other.

Diageo said it has learned Wednesday that HMRC intends to issue preliminary notices of assessment under the new diverted profits tax regime, which came into effect in April 2015.

Diageo said it understands this will require Diageo to pay additional tax and interest of GBP107 million in aggregate for the financial years ended June 30, 2015 and June 30, 2016.

Diageo said it doesn't believe that it falls within the scope of the new diverted profits tax regime and will challenge the assessments when they are received. In order to do this, it would be necessary to pay the full amount assessed up front and then continue to work to resolve this matter with HMRC, it said.

Diageo also said this issue doesn't change its expectation that the tax rate before exceptional items for the year ending June 30, will be 21%.

Shares at 1505 GMT down 14 pence, or 0.6%, at GBP22.78, valuing the company at GBP57.33 billion.

-Write to Razak Musah Baba at razak.baba@wsj.com; Twitter: @Raztweet

(END) Dow Jones Newswires

May 10, 2017 11:51 ET (15:51 GMT)