Vodafone forced to defend HMRC deal

Vodafone has been thrust into the spotlight once again over its tax affairs, after a previously unreported deal with HMRC came to light that allegedly saw the company reclaim 67 million (57 million) in tax from the Irish government.

According to the Guardian, Vodafone used an Irish subsidiary named Vodafone Ireland Marketing Ltd (VIML) to collect royalty payments from most countries around the world, except the UK and Italy, running into hundreds of millions of pounds.

The newspaper alleges these payments were then funnelled back into the low tax jurisdiction of Luxembourg.

The company also moved senior marketing managers to Dublin to protect global royalty revenues from UK taxation and reduce its corporation tax bill, it is reported.

While the full details are not clear, in 2009 Vodafone was able to claim back 67 million from the Irish authorities in tax that should have been paid in the UK after HMRC settled a dispute with the company.

A Vodafone spokesperson told IT Pro: "Vodafone conducts itself in full compliance with the law and always operates under a policy of full transparency with the tax authorities in all countries in which we operate. Vodafone's relationship with tax authorities is based on complete disclosure and a rigorous adherence to due process at all times.

"The royalty payments that were made were done so under domestic and international transfer pricing rules which are set up by governments to allocate appropriate taxable profits from one country to another. The company's local UK and Italy operating companies continued to pay fees to Vodafone Group in the UK and no royalties have ever been paid from the UK to Ireland or elsewhere.

"The settlement with HMRC related to a number of technical factors regarding inter-Group transfer pricing arrangements."

This is the second time a controversial deal between Vodafone and HMRC has emerged. In 2011, the Public Accounts Committee investigated claims by a whistleblower that the UK's tax collection authority's decision to waive a potential tax bill of up to 7 billion may have been illegal.

Vodafone has also come under fire from groups such as UK Uncut, as well as politicians, for not paying any UK corporation tax for two successive years, despite paying 2.6 billion in international taxes in 2012.