Not quite, but close.
In Google's case there is a bill from Ireland that neatly cancels out most of the UK profit. That bill is for "sales made for and on behalf of the UK" or something similar. (For Starbucks read "use of intellectual property" and replace "Ireland" with "Lichtenstein" below).
Once the profit is in Ireland (I think it does this for much of the EU), in turn Ireland receives a bill from Google in the Netherlands which neatly cancels out its profit. Google NL has no employees, and is a brass plaque on the wall of an anonymous office block.
Google NL then gets a bill from Google's headquarters in, wait for it, Bermuda. All of the profit is therefore pooled into Bermuda where it is taxed at ... zero percent. Once taxed (dependent on the treaty with the US, where the top company is) it won't be taxed again (yes I know it was taxed at 0%, that's still taxed), so arrives in the US net of tax. It's how many offshore jurisdictions work, this is known colloquially as a Dutch Sandwich, which sounds far more risque than it actually is.
Your substantive point is correct, if the chap on the ground is doing the legwork then the bill is not real, and not at "arms length" and therefore void, pulling profit back to the UK and subject to its laws. If that is the case, then it should be punted to the HMRC Commissioners to investigate, and if needs be prosecute/fine/ whatever.
There is a small irony here, but I am sure a google of "transfer pricing" will explain more. I would not suggest googling "dutch sandwich".
For other readers, there is an interview with Hodge in this month's Economia magazine (it's the Accountancy publication for the UK) and the FT this week has done an interesting series on how all this works, including the case for doing it and why its a Good Thing(tm).
From my point of view these are bad laws poorly implemented and poorly enforced. I can't find it offhand, but a study I read recently set out that this sort of nonsense in many poor economies removes sufficient tax revenue that if collected correctly it would remove the need for incessant and wasteful economic aid from the older economies.
The whole thing, internationally, has to be re-negotiated with respect to the needs of all countries, not just the UK/US and the G8 needs to take responsibility for helping out other economies dealing with this too.