This is going to be a fun story.
Accounts filed in Dublin show that in 2009, HMRC settled a dispute with Vodafone over its Irish tax returns. The overall size of the settlement has not been revealed, but it involved Vodafone reclaiming €67m from the Irish government in tax that should have been paid in the UK.
So, Vodafone has paid more tax to the UK than it originally thought it ought to. This is going to be a scandal how?
Plus. they\’re still not getting the basic point about corporate taxation:
The UK-based mobile phone group used an Irish subsidiary, which employed no staff between 2002 and 2007, to collect hundreds of millions of pounds a year in royalty payments from operating companies and joint ventures around the world. By 2007, Vodafone Ireland Marketing Ltd, a company registered to an industrial estate in the Dublin suburb of Leopardstown, was reporting a turnover of €380m (£320m) a year.
During a four-year period, these royalty payments, collected from most countries except the UK and Italy, have helped Vodafone send more than €1bn worth of dividends to the low tax jurisdiction of Luxembourg from Dublin. The dividends, which include a final payment of €142m due to be delivered this year, came from profits made after taking advantage of Ireland\’s low corporation tax rates.
The law is different now but in that period none of this really made much difference. It allowed Vodafone to delay tax payments but not to miss them altogether. For if that money was brought into the UK in order to pay a dividend (the ultimate aim of any company of course) then it was taxable at full UK corporation tax rates, minus tax already paid elsewhere.
The company confirmed its Irish settlement had never been separately disclosed in its annual reports, and was not connected to a £1.25bn payment to HM Revenue and Customs in 2010 to settle a much publicised dispute over the use of a Luxembourg subsidiary.
That\’s what this payment was of course.
All these shenannigans, they can\’t (or in the past, could not) avoid tax for a UK domiciled company. All they could do was delay it. Because the moment the cash crosses the border in order to be paid to shareholders it\’s taxable.