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Q & A
1. What is the basis of the £6 billion number being quoted?
We do not know how this number was arrived at. HMRC has said that it is an “urban myth”.
2. Did Vodafone originally anticipate £2.2 billion in tax for the Mannesmann transaction?
No. Vodafone has never believed that there was any tax due from these arrangements and has repeatedly said so publicly. The arrangements were commercial and were not intended to avoid UK tax. But the application of Controlled Foreign Company (CFC) legislation is complex, and in such circumstances it is not unusual – and in line with relevant accounting rules – for companies to make a provision in case of future liability. The £2.2 billion provision made in this case reflected the complexity of the legal matter.
3. By what means did Vodafone obtain a lower tax settlement?
In the July 2010 agreement HMRC and Vodafone agreed to settle all enquiries relating to certain ‘controlled foreign companies’ for £1.25bn after an exhaustive and rigorous examination of all the facts and circumstances and intensive negotiations that tested all the arguments of both parties.
4. Why did HMRC allow Vodafone to pay only £1.2 billion in tax, instead of £2.2 billion?
We do not speak for HMRC, but they have issued a statement which says: ‘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 £1.25bn and at no point was a liability greater than that established.”
5. If Vodafone felt it had no liability why did it agree to pay £1.25 billion?
After rigorous negotiations with HMRC Vodafone decided to pay £1.25 billion to settle the matter to bring nearly 10 years of litigation and consequent uncertainty to an end.
6. Why was the transaction carried out through a Vodafone Luxembourg subsidiary rather than through the UK?
Vodafone does business in Europe, the Middle East, Africa, Asia Pacific and the United States through subsidiary companies, joint ventures, minority investments, and business partnerships, which are held and financed by some of Vodafone's overseas companies, including those established in Luxembourg and elsewhere.
7. Is it true that Vodafone's Head of Tax, John Connors, worked at HMRC until 2007? Was he responsible for the negotiations with Vodafone whilst working for HMRC?
Vodafone’s Director of Tax Strategy and Policy, John Connors, was formerly a tax inspector and until early 2007 a Senior Civil Servant at HMRC. At no point whatsoever in his career at HMRC was he responsible for any enquiries or negotiations with Vodafone. As a former Senior Civil Servant, his employment at Vodafone was subject to the usual Cabinet Office clearances.
8. Is it appropriate for Andy Halford to advise the UK government on tax policy after this agreement has been reached?
It is for the Treasury to decide who is best placed to advise on tax and competitiveness. The Business Forum on Business Tax and Competitiveness is a collection of representatives from government, industry and academia. The agreement reached with HMRC has no bearing on the input Andy can bring to this forum. http://www.hm-treasury.gov.uk/tax_forums_business_tax_competitiveness.htm
9. Is the HMRC/Vodafone tax settlement related to George Osborne's recent visit to India to lobby on behalf of Vodafone India in relation to its tax bill there?
There is no link at all between the agreement between HMRC and Vodafone and the Chancellor of the Exchequer’s visit to India.
10. Is this the same issue as the dispute in India?
No. The Indian Tax authorities are claiming tax from Vodafone on the gain that was made by the Hutchison Telecom International Group when Vodafone acquired Hutchinson Essar. Vodafone decided to go to the Indian courts to resolve the relevant legal questions, as the interpretation of Indian law on which the Indian Tax authorities are relying is without precedent in India.
11. How many Vodafone stores were closed across the UK over the weekend by the protest action?
A small number of stores were affected, to varying degrees - some remained open, some reopened after a couple of hours and some remained closed for longer.
Statement 22 October 2010
Vodafone takes corporate responsibility very seriously and in that regard does meet its tax obligations in the countries in which it operates. Under the terms of an agreement with HMRC earlier this year, Vodafone will pay a sum of £1.25bn to settle a case concerning 'Controlled Foreign Companies' which was agreed after a full and rigorous examination of the facts and circumstances by HMRC, followed by intensive and tough negotiations about the complex legal issues involved. It is incorrect to suggest that there was an outstanding tax bill of £6bn, as this was never the case.
