Vodafone in multimillion tax deal with HMRC over Irish subsidary

Vodafone reportedly made a multimillion pound settlement with HMRC over a tax dispute involving returns from an Irish subsidiary, set up to receive joint venture royalty payments.

The actual size of the previously unreported arrangement has not been revealed, however it is believed to have involved Vodafone reclaiming €67 million (£57 million) in tax from the Irish government, which should have been paid to the UK.

The subsidiary, registered to an industrial estate in the Dublin suburb of Leopardstown, is said to have collected millions of pounds of profits from licensing agreements.

Despite employing no staff between 2002 and 2007, the company, Vodafone Ireland Marketing Ltd, reported a turnover of €380m (£320m) a year by 2007.

The funds collected by the subsidiary from most of its operating countries except the UK and Italy, contributed to dividends of €1 billion (£850 million) that were sent through Ireland to low tax jurisdiction Luxembourg.

To further avoid paying UK tax on the global revenues and be entitled to the Irish tax rate being halved from 25 per cent to 12.5 per cent, Vodafone also moved senior marketing managers to Dublin.

Despite being ran out of London, Vodafone, the world's second largest mobile network by revenue, has paid no corporation tax in Britain for the last two years.

Vodafone said activity at the Irish subsidiary ended in 2011 when its operations were transferred to the UK.

In a statement to Sky News, the company defended its policy: "Vodafone conducts itself in full compliance with the law and always operates under a policy of full transparency with the tax authorities in all countries in which we operate," a spokesperson said.

"Vodafone's relationship with tax authorities is based on complete disclosure and a rigorous adherence to due process at all times."

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