Revenue and Customs is only supposed to permit such arrangements if multinational groups can demonstrate that brand licensing agreements, or any other intra-group trading, are conducted at “arm’s length” – that is, as if the companies are not part of the same group.
No. That rate should indeed be arms length. But the actual arrangement: well, if it’s to another company in the EU it’s actually illegal for HMRC to try to tax such payments. The importance being here that:
David Cameron this month pledged to make “damn sure” such firms pay their fair share in the future. “It’s simply not fair and not right what some of them are doing by saying: ‘I’ve got lots of sales in here in the UK but I’m going to pay a sort of royalty fee to another company that I own in another country that has some special tax dispensation.’”
Cameron can bluster all he wants. It’s just not a piece of law he has any control over.