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TW Ed wonders if MPs are asking HMRC and the Treasury to find a way around their own legislation.

When it was announced last week that Vodafone was selling off its very substantial stake in the US company Verizon for a sum of more than £80bn, I took note that it ranks as one of the ‘largest’ deals ever announced.

It did not take long for questions to be raised about the prospective tax receipt to the UK Exchequer. While I was racking my brain to wonder the basis for charge, certain MPs wasted no time in pressing for a tax bill - Mrs. Hodge, of PAC fame, reportedly said:

“We need assurances that HM Revenue & Customs has crawled over this deal and done its best to make sure taxpayers receive the highest amount of this sudden windfall. If there is a flaw in the legislation, Treasury ministers should look at it urgently.”

Now, I didn’t think that there was a “flaw” in the legislation as such: the Substantial Shareholdings Exemption was introduced to – as the name suggests – exempt this kind of disposal by a trading enterprise. In fact, a quick review of the consultation indicates that the regime was introduced to make the UK a “better place to do business” for global multi-nationals such as Vodafone.

Perhaps MPs could be forgiven for not being aware of such a specialised tax exemption – they’re not tax experts, after all. Except, perhaps, if they voted for (or at least on) this particular piece of legislation about a decade ago?

Surely Mrs. Hodge realised that the gain would automatically be exempt under UK legislation – which she helped to introduce? And then it occurred to me that perhaps she did, and she was actually asking her Treasury and HMRC colleagues to scrutinise the legislation to see if there were a way around it, so that the share sale might in fact be taxable after all.

I am not sure which is worse but I do rather fancy the latter, as it calls to mind a scene where certain august bodies find themselves quietly seeking counsel from those more versed in finding a way around tax legislation, so that it might be applied in a way in which Parliament had clearly not intended…

Regards all,

TW Ed