Vodafone defeats Customs in £2bn tax fight

Vodafone, the world’s largest telecoms group, has won a £2 billion tax battle with Revenue and Customs (HMRC) that could lead to billions of pounds of savings for other UK-based multi-nationals. The High Court ruled that it was illegal for HMRC to impose UK rates of corporation tax on a Vodafone subsidiary in Luxembourg, where taxes are lower. Vodafone, which set up the subsidiary as part of its takeover of Germany’s Mannessman in 2000, had set aside £2.2 billion in case it lost the case. But Mr Justice Evans-Lombe ruled that UK tax laws on Controlled Foreign Companies (CFC) were incompatible with European law and ordered HMRC to close its inquiry into Vodafone’s tax affairs. Mark Persoff, a tax partner at Clifford Chance, said: "This is potentially a major blow to HMRC, as one of the key planks of tax avoidance legislation... [read full story]