Vodafone paid UK tax on Irish subsidiary

Vodafone made a multi-million pound settlement to British customs after it used a subsidiary it set up in Dublin to collect royalty payments around the world.

Vodafone Ireland Marketing Ltd, which was registered to an industrial estate in Leopardstown, was reporting a turnover of more than €500m per year by 2011.

The news of the settlement with Her Majesty’s Revenue and Customs (HMRC) in Britain was reported by The Guardian.

It said that, despite the fact that the subsidiary employed no staff between 2002 and 2007, it was used to collect millions of euro in royalty payments from operating companies and ventures around the world.

In or around 2007, the subsidiary delegated a number of high-profile staff to the Dublin operation which, by that stage, was expected to oversee a number of international accounts and the company’s high-profile sponsorship deals, including Formula One and the Champions League.

The Guardian said accounts filed in Dublin showed that, in 2009, British customs settled a dispute with Vodafone over its Irish tax returns but the size of the settlement was not revealed. It said the settlement involved Vodafone reclaiming €67m from the Irish State in tax that should have been paid in Britain.

According to company accounts filed for Vodafone Ireland Marketing Ltd, it had a turnover of €282m in 2012, with a pre-tax profit of €166m. In 2011, turnover was €509m with a pre-tax profit of €249m.

According to the 2008 company filings: “Following the establishment of the global brand management function in Ireland the activities of the company have increased. A confirmation has been obtained from the Irish Revenue that the company is now carrying out trading activities and, accordingly, subject to the corporate tax rate of 12.5%.” The rate would apply from Nov 1, 2007.

According to The Guardian, the Irish brand subsidiary was wound down after the staff were brought back to Britain in 2011.

Asked about the settlement, Vodafone was quote as saying it strongly rejected any suggestion of tax avoidance and saying there have been no allegations of wrongdoing from HMRC.

“In all respects and at every point, Vodafone has conducted itself with the highest integrity and in full compliance with the law,” it said.

When asked about the reason for the location in Dublin, Vodafone told The Guardian its group brand and marketing function was established during a period of significant international expansion.

“Vodafone is a global business, and it is therefore feasible to locate centralised group functions in a number of different locations depending on a range of factors,” it said. “Dublin was identified as a location for this activity on a number of grounds, including the commercial, regulatory, and tax environment in Ireland at that time.”

HMRC could not comment on the settlement as it is prevented by law from discussing the affairs of individual taxpayers.

Vodafone’s Irish adventure was not an entirely bruising experience. Before it closed, the Dublin office paid more than €1.04bn (£900m) in dividends during a four-year period to a parent company, Vodafone Investments Luxembourg Sarl — based in the low-tax jurisdiction of Luxembourg.