Vodafone denies £6bn tax bill claim; HMRC describes figure as ‘urban myth’
Vodafone has dismissed claims that the Government wiped out a £6 billion tax bill regarding its purchase of German engineering company Mannesmann for £157 billion in 2000, and said it had acted appropriately throughout the situation.
Earlier this week a protest by 40-plus demonstrators closed Vodafone’s Oxford Street store for a day after stories circulated that it had been excused a £6 billion tax bill over the acquisition.
Private Eye suggested Vodafone had attempted to avoid paying tax on the purchase by putting it through a Luxembourg subsidiary, Vodafone Investments Luxembourg, and struck a deal with HM Revenue and Customs (HMRC) that would cost taxpayers ‘at least £6 billion’ in lost tax.
The story emerged at the same time as the Government announced £7 billion of welfare cuts, angering some quarters.
However, a Vodafone spokesperson denied that the £6 billion figure was accurate, and questioned the origin of such a figure.
The spokesperson said: “The issue is to do with Controlled Foreign Companies, and whether multinationals are operating brass plate operations or genuine businesses overseas.
“In the course of long-term, ongoing discussions against assessment of the revenue raised it was recognised that this is not a brass plate operation and that we have employees and assets involved.
“The amount of money we had provided in our accounts to satisfy our auditors if there was a risk we had to pay a tax bill was £2.2 billion. Earlier this year we agreed to settle this case with HMRC for £1.25 billion.”
The spokesperson added: “The idea we had a bill waived is not the case. It is incorrect to suggest there was ever an outstanding tax bill of £6 billion. That was never the case.”
An HMRC spokesperson said: “We cannot comment on the detail of the settlement but we can confirm that it was reached by HMRC following a rigorous examination of the facts and an intensive process of negotiation that tested the arguments of both parties.
“As a result it was agreed that Vodafone’s liability was £1.25 billion and at no point was a liability greater than that established. There is no question of Vodafone having an outstanding tax liability of £6 billion. That number is an urban myth.”