By: Anne Wilson
Vodafone Spin and Mascara!
Listening to Radio 4 whilst getting ready for work the other morning I came close to smudging my mascara I was so cross at the media spin put on the Vodafone sale of Verizon to imply that Vodafone was “avoiding” UK tax on the sale.
Vodafone is not avoiding UK tax on this transaction because there would be no UK tax due under current tax law.
However “Vodafone complies with UK tax regulations” does not grab the headlines in the same way.
The sale of Verizon is being made by a Dutch subsidiary of Vodafone. However even it were made by a UK company it would still be exempt from UK tax because of tax relief that was introduced in the Finance Act 2002 by the Labour Government for companies selling shares in subsidiaries.
The substantial shareholding exemption enables trading companies to sell shareholdings in trading subsidiaries which have been held for at least 12 months without any charge to tax. A substantial shareholding is defined as not less than 10%.
Margaret Hodge, a Labour MP and Chair of the Commons Public Accounts Committee has called on Vodafone to pay a fair share on the deal to the Exchequer but in accordance with current tax law that fair share would be nil!
Around £30bn of the sale proceeds is expected to be returned to shareholders in the UK and whilst many of those shareholders will be tax exempt pension funds a proportion of the cash will reach individual investors some of whom can be expected to boost the economy by spending it!