Vodafone is facing a possible tax bill of $2 billion – the equivalent of approximately £1.3 billion. The Indian tax authorities believe that Vodafone’s acquisition of Hutchison Essar, a mobile phone operator in the burgeoning Indian market should mean paying capital gains tax. Vodafone had carefully paid the money for the acquisition via the Cayman Islands in order to minimise their tax liabilities and are now disputing the sum with the authorities.
It is not just multinational companies involved in cross border transactions that find they face unexpected tax bills. Unfortunately, even the smallest business can struggle when such a demand arrives. In fact, many have nightmares about just such an occurrence, especially as the tax authorities can force businesses owing them money into insolvency.
If you are involved in complicated tax planning, it can mean there is the possibility of H M Revenue & Customs (HMRC) disputing your tax liabilities with your tax advisor. However, most taxpaying companies do not undertake such transactions. They can still find problems occurring because their business records are incomplete or their accounts are completed late.
One way to avoid this is by the use of online accounting, which reduces possible delays or items becoming lost in the post. This also has the advantage of reducing your accountancy fees. Of course, you still need to ensure your accounting records are kept up to date in order that they can be emailed to your accountant but it is worth it for the peace of mind.
Want to learn more?
Subscribe to our newsletter to get accounting tips like this right to your inbox