Revenue in line for windfall from Vodafone shareholders

The Revenue is in line for a multimillion euro windfall after confusion saw thousands of Vodafone shareholders miss the deadline to avoid a tax bill – but it remains very unclear how much money they will actually receive.

Ireland's 380,000 shareholders in Vodafone stood to be paid over €600 million following the sale by the company of its US business to Verizon, its partner in that country.

They could elect to receive the money as capital which, in relation to Vodafone shares dating back to the original Telecom Éireann shareholding, would mean no tax bill. However, if they did not actively make this choice – or were late in doing so – they face an income tax bill, as well as the universal social charge and PRSI (for those under 70 years of age).

A large number of Vodafone shareholders have been told that they have missed the deadline – including many who posted forms back to the company's share registrar Computershare 10 days or more ahead of the deadline.

That company is now the focus of shareholder anger with several disgruntled investors looking at forming an action group to challenge what they see as undue delays in processing their claims, leaving them with tax liabilities,

However, it remains to be seen whether Revenue will pursue investors for what are generally very small sums. Vodafone, through Computershare, is paying out around €1.24 gross (around 35.7 cent in cash and 0.026 of a Verizon share) for every “old” Vodafone share – ie before last week’s six for 11 share consolidation.

With no dividend withholding tax in the UK, Irish shareholders are this week receiving their full cash entitlement. Amounts owing on Verizon shares where investors have chosen to sell them will follow next week and beyond. It is then their responsibility to settle with the Irish Revenue.

The the average Irish holding is less than 1,300 Vodafone shares before its recent six-for-11 consolidation. In reality, most shareholders hold considerably less. The effective rate of tax will vary between 22 per cent and 55 per cent.

While Revenue is unlikely to concede formally that it is waiving potentially significant sums of tax revenue, in reality, the cost of pursuing small shareholders will far exceed the tax owing.