back to article Vodafone dodges UK corporation tax bill - AGAIN

Mobile carrier Vodafone defended its financial arrangements today as it coughed to yet another legal dodge of UK corporation tax payments by asking Brits to have some sympathy over the huge debt mountain it is sitting on. The multinational justified its actions by saying it was continuing to pump big sums of cash into Blighty by …

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Anonymous Coward

We all know that increasing taxes always whips an ailing economy into shape.

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Hmmmm

And the bastards at the tax office are chasing me for £20 from 5 years ago (with no proof other than you owe us cough up), Perhaps i should change my name to vodaphone ?

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Anonymous Coward

Re: Hmmmm

Perhaps you should pay your tax bill.

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Anonymous Coward

Re: Hmmmm

And what if it is not a real tax bill?

My parents were chased up for an unpaid tax bill, had it confirmed that it was a tax office mix up, and a week later got a letter saying they had to pay anyway, that there was no legal recourse to fight the tax office demand and no appeal procedure that they could use.

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Anonymous Coward

Re: Hmmmm

There is always an appeal procedure.

In the case of the tax office you can ask for an internal review or an independent tribunal.

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Anonymous Coward

Re: Hmmmm

That isn't what all of the correspondence, or any of the people on the tax phone line said.

In the end it was easier and cheaper for them to just pay the (fictional) tax bill than hire someone who could deal with it.

Which of course is what the tax office wants.

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Re: Hmmmm

Stop it! People want emotion, not fact. There is, of course, an appeal procedure. I was wrongly told I owed around £20k and they eventually backed down and apologised.

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Anonymous Coward

Re: Hmmmm

I'm sorry, this isn't emotion this is fact.

And this fact that has cost my parents a substantial amount of their (already not enough) earnings this year.

Well done for your 20K bill being dropped, it doesn't alter the fact they they were told in letter, and on the phone, that there wasn't one available to them.

Whether that is legally true, or just what people who have little funds available for legal recourse is immaterial, it is what they were told and they don't have the funds for legal recourse, ergo, it was the reality for them.

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Anonymous Coward

Re: Hmmmm

It can also work in your favour though. I know someone who was sent a bill for 4,000 who queried it and ended up with a refund of 4,500. They are simply incompetent.

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Isn't this the same Vodafone...

Who is getting £84 billion for it stake in Verizon? And is returning £22 billion to shareholders?

What happened, did they lose all this money behind the sofa?

Or do the use inter-company loans and other complex financial products that allow them to move their "official" profits to low/no tax jurisdictions?

Yeah, thought so...

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Re: Isn't this the same Vodafone...

That's because companies are taxed on their profits, not on cashflow. The sale of the Verizon stake merely changes the asset that Vodaphone owns from being 45% of a JV to a smaller % of the Verizon parent business and a pile of cash. Unless the new shares + cash are valued at more than the original shares, no profit was generated by the transaction.

It also happens that the sale is tax exempt as a 'substantial shareholding' , in just the same way that selling your house is tax exempt. It is because the law says it is.

Nothing to see here, next story please.

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Re: Isn't this the same Vodafone...

I'm no tax expert, but I expect that a portion of that £22billion will be paid to the taxman as individuals' capital gains tax.

Only a small portion though, because many of the benifactors won't be UK residents or UK organisations so won'tpay UK tax.. Further, many will use some means to show no net capital gain, to avoid paying any tax onit. I know I would.

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Re: Isn't this the same Vodafone...

One reason quoted for the high price paid (200% of the share price) was actually because of the tax liability, but perhaps it went to the patent company and not Voda uk?

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Re: Isn't this the same Vodafone...

Yes and no. Substantial shareholding only applies to shares owned by UK companies and these shares are held by Vodafone Holland because of (you guessed it) the low tax Dutch tax regime.

As such they would have been outside the 2002 Finance Act and "substantial shareholding". The reason HMRC is getting squat is because of the following:

1) Previously the UK would have charged a foreign controlled company the difference between the tax it paid in the foreign jurisdiction and in the UK, but this was deemed contrary to EU law.

2) Even after all this we would have still got them on any profits they tried to repatriate to pay off UK shareholders. This would have amounted to about £5 billion (or the cost of higher education for a year in the UK). But the law was changed in 2009 so that it's now perfectly OK to move money to the UK for dividend purposes and pay no tax on it.

So, the story is that where there was once a tax obligation there isn't one. This is all recent. This is money would could have used to improve services/reduce the deficit (choose depending on political persuasion) but it's no longer considered chargeable.

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Re: Nothing to see here, next story please.

Please stop discussing this and get back to work plebs!

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Re: Isn't this the same Vodafone...

"will use some means to show no net capital gain"

Gosh, that's amazing. All this tax I had to pay and there was "some means" to not pay it. Perhaps you could tell me what that might be so I too can show no net capital gain?

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Re: Isn't this the same Vodafone...

"the story is that where there was once a tax obligation there isn't one."

You missed out the bit where there wasn't actually a tax obligation before either since UK law wasn't compliant with EC law on the taxation of Controlled Foreign Corporations in the EU. But hey, when you've got a narrative to run with then you gotta elide anything that contradicts it.

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Re: Isn't this the same Vodafone...

That £22 billion to shareholders will have involved taxes being paid by the receiver of the dividends being paid, or capital gains tax on share buy backs.

No complex tax tricks are needed in the UK. Just borrow money and you can offset the interest payments against the tax, so the more debt you take on, the less tax you end up paying. This is something that the government is responsable for fixing.

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Anonymous Coward

Re: Isn't this the same Vodafone...

> I'm no tax expert, but I expect that a portion of that £22billion will be paid to the taxman as individuals' capital gains tax.

A portion of the payout will be in the form of a special dividend which is counted as income so you will pay income tax on it. Basic rate tax payers (<£32,000 pa) will have to pay 10% in tax, higher rate (<£150,000) will pay 32.5% and those earning more than £150,000 will pay 37.5%. As for Jonny Foreigner, they will pay their tax in whatever country they happen to reside in.

Another portion is in Verizon shares. You can either keep them or sell them. For as long as you keep them you will not be liable for tax, but any dividends on the Verizon shares will be taxed at 30% by the US Government (it is a US firm) but you can fill in a form (IRS W-8BEN) and have the tax reduced because you do not reside in the USA. If you sell the Verizon shares then you will be liable for capital gains tax on the profit you make.

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Thumb Up

Re: Isn't this the same Vodafone...

Thank you for enriching my vocabulary.

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Re: Isn't this the same Vodafone...

Yes it is. But maybe before hammering a company for a transaction that has nothing to do with corporation tax you should try and understand the UK tax model a little more.

The financial aspect of selling Verizon Wireless has absolutely nothing to do with Corporate tax in the UK. If you but a car in America then sell it a year later why would the UK government see any of that $$? Just because you're a UK citizen?

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Re: Isn't this the same Vodafone...

Thanks to the Labour party for that particular law change.

Shareholder payouts ARE taxed though (under the right conditions), so the UK will see some of the money from that transaction, thanks to a successful company bringing in a load of $$.

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Re: Isn't this the same Vodafone...

Cars are classified as a wasting asset, and therefore exempt from CGT. Verizon shares are not so classified, so are subject to CGT.

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Re: Isn't this the same Vodafone...

Its a sad state of affairs that a post that shows the person has no understanding of the tax rules he is commenting upon is uprated so highly ...

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Anonymous Coward

Re: Isn't this the same Vodafone...

Is there some sort of voodoo involved here in that interest payments are somehow not an expense ? There are thin cap rules, but (virtually) all businesses borrow money and the cost of doing so is a perfectly normal and legitimate cost of doing business.

And what's all the fuss over Vodafone buying radio spectrum and deducting the cost (over time) as an expense. It seems so plainly obvious that it is an investment intended to provide a better product to its customers (4G data) that has a very significant cost, why in the merry hell would they NOT be allowed to count the cost before paying tax ? Break that rule and no business would ever bother investing at all, why not extend it and make every business just pay 100% of their turnover in tax, that would settle you greedy bastards down a bit. Might have a slight problem with service levels, but just get the state to provide a replacement and you'll all be happy (because it will be compulsory to be happy).

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Anonymous Coward

Perhaps the Interest Costs

are owed and payable at PayDay Loan rates of Interest to a sibling company operating out of a Broom Cupboard somewhere in the British Virgin Islands?

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King Cnuts

I left them ages ago.

The fact they only gave decent deals if you begged for it, (or indeed were a new customer) made me leave. The fact they're a bunch of dicks makes me more glad I did so.

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Anonymous Coward

Re: King Cnuts

Perhaps you need to ask yourself how much UK tax do the OTHER UK mobile companies pay??

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Anonymous Coward

Re: King Cnuts

Downvoted for telling the truth. Three, EE or O2 based in the UK - thought not...

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investing in UK!!!

Building network infrastructure to roll out a service that they plan to make a profit from is not 'investing in the UK'

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Anonymous Coward

Re: investing in UK!!!

Ummm, care to explain why not? Is buying some shares that I later hope to make a profit from, not "investing"? Is spending money on R&D that you hope will lead to new inventions not "investing"? Or training up your workforce so they can do more tasks not investing?

At the point in time when any of those investments start to pay back, that's when the tax on profits then comes in.

Well that's assuming that I haven't magically moved the "operation" to Luxemborg (*) by then.

(*) Other low-tax countries are available.

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Anonymous Coward

Re: investing in UK!!!

" Is buying some shares that I later hope to make a profit from, not "investing"?"

Depends on your definition of investing. There's a view that secondary market trading is speculation rather than investment, and creates no value for the wider economy. And training staff is usually an operating item, rather than an investment, since it is rarely capitalised.

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Re: investing in UK!!!

"Ummm, care to explain why not?"

Because the word "investing" has changed its meaning since Gordon Brown became chancellor. It now means "borrow some money and spend it on people who will vote for you".

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Anonymous Coward

Re: investing in UK!!!

Resistance is futile, you will be assimilated.

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Anonymous Coward

Re: investing in UK!!!

So what is your definition of investing in the UK? When the government invests in education, infrastructure etc. it's only in the hope that it increases tax revenues in the future.

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Is this the same company that bought Cable and Wireless?

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yes. But I think that it was seen as an act of mercy more than one of investment :)

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Joke

Is this the same company that bought Clueless and Witless?

Changed that for ya :)

Amusingly the deal went through on April Fool's day. Make of that what you will :)

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And the point is?

Heavens, straight out of the kindergarten school of financial journalism.

There are some corporations and private equity outfits which have engaged in practices which have artificially loaded their subsidiaries with expensive debt (often by loans from parent companies based in tax friendly regimes), but there seems to be no suggestion that this is what has happened with Vodafone. This is not a matter of "sympathy" over debt, it's simply how taxable profits are calculated. If interest on loans is not allowed to be used when calculating taxable profits, then you'll simply see private sector investment virtually disappear.

If there is evidence of artificial tax avoidance schemes, perhaps the journalist who wrote this might provide the evidence. As it is, there is nothing in the article.

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Linux

Re: And the point is?

as someone who has actual done accounts for a small firm, let me say all companies can do this. Only they can't, because they are not big enough to have multiple markets to play around in and a team of accountants. If you are smaller than a certain size, you probably don't even have an accounts dept, just a lone person (yes...!). Unlike when HMRC chases an individual, very few individuals can generate any pain for Govt - which enough lawyers can.

Really, if individuals could have as much freedom to "write off" expenses the way a business does, perhaps there would be less complaints from the population. Only we cannot (well not in the UK anyway). You earn money for your work, a whole chunk of it is taken from your pay packet, and then every item with VAT on it , YOU pay. Companies don't pay it. They only pay the difference. They collect it for the Govt (for free I might add).

But fundamentally, the execs at the company pay their workers and themselves from the "operating budget" and so what's left for the taxes is "$income-$expenses". Not so much freedom on $income, but quite a bit on $expenses. Unlike us plebs, we get taxed *before* we pay for living expenses. Businesses pay *after*.

The execs deserve every bit of flack they get though, because that is what they are PAID for. I seriously doubt anyone on less than 5x10e5 GBP/year has any say whatsoever in this issue.

I agree let's have some well researched proof, at the very least we will learn how our money is being spent....

P.

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Anonymous Coward

So is..

..paying VAT on goods and services a valid excuse for everyone else to not pay income tax?

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Anonymous Coward

Re: So is..

I would argue that a lower corporation tax rate is good for business, and that VAT is one of the best way to collect taxes, all companies work to minimise costs, and maximise profits, so make it viable for businesses to pay tax here and they will... I am all for a simple tax system where accountants and tax lawyers are no longer needed...

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Anonymous Coward

Hmm, of course they don't divert profits abroad. That is why they closed all their roaming and procurement teams globally and relocated them to Luxembourg. Hmmm. Having roaming managed in Luxembourg. One of the few countries in Europe where Vodafone has zero customers... Wonder why. Now roaming is a multi-billion business for Vodafone. Bet they pay less tax now that it is in Luxembourg.

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Anonymous Coward

No they didn't, those teams exist in every Vodafone operating company. Luxembourg happens to be a very good place to host offices, despite whatever tax implications there are.

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Anonymous Coward

"Vodafone does not enter into artificial arrangements"

* SPLUTTER *

No it just doesn't pay it's tax on massive foreign deals such as the Mannesmann debacle. Fight off paying anything in the courts for years and then get the head of the HMRC, against the wishes of all his legal & accountancy staff, to shake off billions in unpaid tax over a few nice meals in exchange for £16 and a pickled egg.

http://www.theguardian.com/commentisfree/2010/nov/14/vodafone-tax-evasion-revenue-customs

Lying, tax-dodging, hypocritical thieves.

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"Fight off paying anything in the courts for years"

Oops, a few typos in that. Let me fix that for ya:

"Using the courts to make the HMRC comply with the law, and eventually winning".

Of course, if you want to live in a country where people are randomly punished without an opportunity to argue their case in court then go right ahead: with your bolshy attitude you'll be one of the first to be put to work in the new salt mines.

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Nope, the case was never decided because they reached a deal with HMRC.

However they had made provision for a substantial payment in their accounts...

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Bronze badge

Err, no

However they had made provision for a substantial payment in their accounts...

Not quite exactly.

What they did is say that we're going to bring some of these foreign profits into the UK in order to pay dividends to our nice shareholders. And all of us, Vodafone, HMRC, the courts, the EU, agree that when those profits come back into the UK to pay a dividend then corporation tax will be due.

That's actually what they did.

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Anonymous Coward

Interest in debt is their own fault

No reason why I, or anyone else, should be helping them out of a hole they dug.

Tax turnover and eliminate the loopholes at a stroke.

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Anonymous Coward

Re: Interest in debt is their own fault

>Tax turnover

Yeah, you could call it something like "value added tax" ....

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