Vodafone’s appeal against the ruling of tax bill of US$3.5 billion to be paid to UK government has been refused by UK Supreme Court, reported by the Daily Telegraph. Vodafone won the case last year in High Court division where ruling was in favor of it told that the tax claim by HMRC (Her Majesty’s Revenue and Customs) were incompatible with EU Law. But this ruling was again overturned this year and Vodafone had to appeal again to Supreme Court for final verdict.
After the takeover of Germany’s Mannesmann in 1999, Vodafone used a holding company to manage that which is based in Luxembourg.
According to UK Tax Legislation’ 1988, the profits of those foreign company in which a UK company owns share of more than 50% would be attributed to the resident company and subjected to tax in the UK. The resident company receives a tax credit for the tax paid by the CFC.
An exception in this law prevents all UK company from using this specifically to minimize their UK tax liabilities.