Why Vodafone won’t pay any tax on the Verizon sale
AS Robert Peston at the BBC reports:
That said, the profit for Vodafone looks to be many tens of billions of dollars.
Which of course begs the question how much capital gains tax Vodafone will pay to the British taxman, Her Majesty’s Revenue and Customs.
I have learned that the British taxman will not get a penny, which may prove to be controversial.
He gets the reason there won’t be any tax wrong. But he is right to say that the UK won’t get any cash out of Vodafone.
There’s a number of reasons for this too: but basically it’s because the law says that Vodafone don’t have to pay any tax on this. No, not a loophole, not even a little bit of avoidance. Gordon Brown said, back in the 2002 Finance Act, that when a company sells a subsidiary (there’s a couple of tests, but Vodafone easily passes all of them) then there’s no capital gains or corporation tax to pay on any profit. He also said that you don’t get a tax credit for any losses which is the bit that tends to get forgotten.
So, this is definitely the will of Parliament and all that, that there’s no tax payable.
As it happens the Vodafone set up is more complex than that but it will still end up with the same result: no tax due to the UK. And the reason? Because Parliament said so.