Vodafone agreed to pay HM Revenue & Customs only £1.25bn in settlement

UK operator Vodafone will get to keep almost £4.8bn that is under dispute in a controversial tax case that has been running since 2010. The UK National Audit Office this week ruled that pursuing Vodafone through the courts ran the risk of loss, and that the UK tax authorities were best advised to settle with Vodafone for £1.25bn.

The dispute originated with the acquisition of Mannesmann in 2000. By 2010 Vodafone was looking at a tax bill of £6bn, but had only put aside £2.2bn. Not all of the information about this is in the public domain, but Vodafone somehow negotiated with HM Revenue & Customs a £1.25bn settlement.

Naturally, the UK was up in arms about this and in December last year the National Audit Office (NAO) was called in to look at the deal. The results of the investigation were published this week and make unhappy reading for anyone expecting Vodafone to have to cough up the difference.

The NAO was assisted in its review by Sir Andrew Park, who concluded that HMRC were “right” to settle the dispute with Vodafone at £1.25bn “because, if the case had not been settled, it would have gone to litigation. If this had happened, there was a substantial risk that the Department [HMRC] would have received nothing.”

Vodafone was at pains to point out that it has given around £6.7bn to shareholders this year “who include virtually every major investment fund relied upon by millions of UK pensioners and savers,” for which it felt it should be applauded.

Vodafone group chief financial officer Andy Halford said: “For more than a year, Vodafone has been falsely accused of improper conduct. As we have consistently stated, those attacks were unwarranted and unjust. We acted with the utmost propriety throughout the HMRC settlement process, and the National Audit Office has now concluded that the outcome was good for the UK taxpayer. We welcome this vindication. Vodafone has always been a responsible company with a strong commitment to managing our affairs properly and diligently within the law and with full disclosure to all relevant tax authorities.”


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