Vodafone has said it will continue its battle with the taxman over a tax
avoidance case worth an estimated £2.2bn after losing a ruling today in the
Court of Appeal.
The ruling overturns a judgement in July last year over the payment of taxes
on the mobile phone giant’s Luxembourg subsidiary set up after its acquisition
of Mannesman in 2000.
Vodafone argued that UK rules on the taxation of profits of foreign
subsidiaries – Controlled Foreign Company rules – were incompatible with
European Union law.
The Court of Appeal ruled that CFC rules apply to companies operating outside
the European Economic Area and also to EEA companies without genuine economic
UK CFC tax legislation is designed to stop UK companies avoiding tax by
diverting income to subsidiaries in low-tax countries.
A Vodafone spokesman said it would appeal to the House of Lords against the
Bill Dodwell, head of Deloitte’s tax policy group, said the judgment was
‘common sense’ but called for further clarification on the kind of economic
activities that will be subject to CFC tax under the Court of Appeal ruling.
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Changes to the tax system is urged to support the growth of entrepreneurs, found a report from the Grant Thornton UK, the Institute of Directors, and the Prelude Group