After attempting successfully to avoid taxation on a Luxembourg-based holding company owned by the mobile phone network provider in 2008, Vodafone could now be forced to repay billions of pounds in corporation tax after a ruling by the Supreme Court.
Although Vodafone was first exempted from paying the taxes to HMRC, a ruling at the beginning of 2009 overturned the initial decision and a campaign by Vodafone to take the issue to the Supreme Court has worked against it, resulting in the solidification of the revised ruling rather than a return to the original plan.
Vodafone had fought for six years to avoid paying tax on profits made by Vodafone Investments Luxembourg (VIL), but the latest ruling has enforced the Controlled Foreign Companies legislation which makes sure UK-based firms do not avoid tax by siphoning profits into holdings operating in foreign countries with lower corporation tax policies.
Under the ruling Vodafone will now have to pay back the difference between the taxes levied against it in Luxembourg and those that would be applicable if VIL was located in the UK, which total more than £2.2 billion.
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