Vodafone has agreed to pay £1.25 billion to HM Revenue & Customs, settling a tax dispute that dates back ten years. The dispute arose with Vodafone's Luxembourg business and HMRC's Controlled Foreign Companies (CFC) rules, which were intended to prevent UK businesses from setting up foreign businesses to avoid UK tax.
Vodafone will pay £800 million in the current financial year; the rest of the tax bill will be paid in instalments over the next five years. Vodafone had already set aside £2.2 billion after losing a Court of Appeal case last year.
In a statement that formed part of the company's quarterly results, Vodafone said it had "reached agreement that no further UK CFC tax liabilities will arise in the near future under current legislation" and that "no CFC liabilities are expected to arise as a consequence of the likely reforms of the UK CFC regime due to the facts established in this agreement."