Tribunal Thwarts Vodafone Subsidiary Tax Hopes
Vodafone has had its hopes dashed of securing a swift resolution to its dispute with the UK authorities over a potential ?ê2.5bn tax bill.A London tribunal on Wednesday turned down Vodafone??s attempt to halt an inquiry by HM Revenue & Customs into the tax treatment of a subsidiary.
Revenue & Customs is seeking to impose a tax bill on Vodafone in relation to its Luxembourg subsidiary because it is a holding company for some of the group??s UK activities.
Vodafone??s disclosure of potential tax liabilities of ?ê5bn in November 2005, including those affecting the Luxembourg subsidiary, contributed to a 10 per cent fall in the group??s share price at the time.
The special commissioners at the London tribunal turned down Vodafone??s application for an immediate ?°closure notice?± that would have curtailed the inquiry.
Vodafone??s dispute is now likely to drag on for at least another 18 months.
Revenue & Customs is trying to impose a tax bill on Vodafone??s Luxembourg subsidiary via the UK anti-avoidance rules known as controlled foreign companies legislation. However, Vodafone claims the legislation contravenes European law.
Vodafone, which is considering an appeal against the London tribunal??s decision, said it did not amount to a significant setback.
Meanwhile, Vodafone confirmed it would not exercise a put option entitling it to sell part of its 45 per cent stake in Verizon Wireless, a leading US mobile operator, to Verizon Communications.
Verizon Communications, the second largest US telecoms company, holds 55 per cent of Verizon Wireless, but wants full ownership.
Vodafone said retaining the ?°full 45 per cent interest is in the best interests of shareholders?±. Verizon Communications said: ?°Verizon intends to focus on continuing to manage and grow the best wireless company in the industry, with Vodafone as our partner.