HMRC must examine deal that avoids British tax, says Hodge: Select committee warning
(Guardian (UK) Via Acquire Media NewsEdge) The chair of an influential select committee has called on HMRC officials and Treasury ministers to urgently examine the pounds 84bn deal by Vodafone that the company said will not incur a UK tax bill.
Margaret Hodge, head of the public accounts committee, expressed concerns following confirmation that the British telecoms company is to sell its stake in Verizon Wireless for $130bn (pounds 84bn). Vodafone said it will not have to pay any tax in Britain because it will take place through a Dutch holding company.
It is the second most valuable corporate deal ever completed by a UK company, after Vodafone's previous takeover of Mannesmann of Germany in 2000.
Hodge told the Guardian that HMRC officials should intervene at the earliest opportunity to ensure that there is no "aggressive tax avoidance" in the way that the deal was done.
"HMRC must begin an absolutely thorough investigation to make sure that UK taxpayers receive the maximum to which they are entitled," she said.
She added that Treasury ministers should also examine whether there is a loophole being exploited by the British company. "If there is a flaw in the law, it needs to be addressed by Treasury ministers urgently," she said.
Under the terms of the deal the company will return pounds 54bn to its shareholders, of which pounds 22bn will go to shareholders in the UK. The deal will not generate tax revenue for the UK but Vodafone will pay $5bn in tax in the United States.
Vodafone is not liable for tax on the deal, it explained, as its stake in the US company is owned through a Dutch holding company. However, even if the business was owned by Vodafone in the UK it could take advantage of UK legislation known as substantial shareholdings exemption, which means companies do not have to pay capital gains tax on profits made from selling shares in another firm.
Hodge has previously clashed with HMRC over the use of tax loopholes by Vodafone. Her committee issued scathing criticisms of a "sweetheart" deal brokered by HMRC officials with the telecoms firm over the Mannesmann deal.
Dave Hartnett, the former head of tax, was accused of letting Vodafone forgo a reported pounds 6.75bn in tax when settling a longstanding dispute with the company. The dispute began in 2000 when Vodafone acquired Mannesmann, a German engineering company and mobile phone operator.
A deal was reached in July 2010, which, according to some, included estimates of future profits for Vodafone for 2011 and 2012. There was no implication that Vodafone had done anything wrong whilst completing the Mannesmann deal.
Margaret Hodge has called for an investigation to ensure there is 'no aggressive tax avoidance' in Vodafone's pounds 84bn deal
(c) 2013 Guardian Newspapers Limited.
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