Taxman let Vodafone off £6bn bill

[Alexikokopops]

Taxman let Vodafone off £6bn bill

By Daniel Martin

16 September 2010, 9:30am

Controversial tax boss Dave Hartnett agreed a deal to let Vodafone off a £6bn tax bill, it emerged yesterday.

In what was described as an 'unbelievable cave-in', the HMRC's permanent secretary for tax allowed the phone giant to avoid paying vast amounts of tax on profits racked up by a subsidiary based in a tax haven.

The disclosure comes after it emerged that Her Majesty's Revenue and Customs had undercharged 1.4million Britons a total of £2billion in tax and would be claiming it back.

Last week Mr Hartnett was forced by Chancellor George Osborne to issue a grovelling apology.

The agreement between HMRC and Vodafone came after negotiations-between revenue officersand John Connors, Vodafone's head of tax. Until 2007, Mr Connors was a senior official at HMRC, where he worked closely with Mr Hartnett.

The saga began a decade ago when Vodafone bought German engineering firm Mannesmann for 180bn euros.

Wanting to route the purchase through an offshore company to avoid paying UK taxes, it set up a subsidiary in Luxemburg where profits would be taxed at less than 1%.

But it was ruled that the deal broke anti-tax avoidance rules.

Nevertheless, Mr Hartnett took the Vodafone case away from his team of lawyers and gave it to another negotiating team, which said the phone company could get away with paying a lump sum of £800,000 and a further £450,000 over five years.

HMRC also agreed that the firm would no longer have to pay tax on its Luxembourg subsidiary's profits. The deal is understood to include some other tax avoidance ruses by Vodafone.

One former HMRC chief told Private Eye magazine the deal was an 'unbelievable cave-in'.

An HMRC spokesman said: 'Our legal obligation to maintain customer confidentiality means we are unable to offer comment on the tax affairs of named individuals or organisations.'

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[James.]

You should have called this thread "Immigrants cost taxman £6bn" then you might have got some responses.

[Jon the Hat]

Vodafone may not have bought the business if they had to pay tax on it's earnings in the UK. Then we would have got nothing.

[Dr The Singh]

Vodafone may not have bought the business if they had to pay tax on it's earnings in the UK. Then we would have got nothing.

That doesn't make it right though, does it!!!!

[AjcW]

I like the taxman, he gave me 600 quid this morning. Granted in future I imagine I will grow to hate him. Im young and learning .

[Jon the Hat]

That doesn't make it right though, does it!!!!

Well yes, it does. We are competing with other countries to attract and keep big business headquartered in the UK. They could move their HQ to Luxembourg, then we would lose a whole lot more tax. This decision makes a lot more sense if you look at the big picture. They could have taken the one off £6bn and lost countless £Billions going forward.