During 2004 Vodafone sold its US group whose principal asset is its 45% interest in Verizon Wireless to Verizon Communications Inc. (“Verizon“).

Vodafone made a return of value to shareholders, partly in cash and partly in Verizon Consideration Shares.

The method by which this value was returned to shareholders was by the issue by Vodafone of B Shares (“Capital Option”) or C Shares (“Income Option”) to shareholders.

Revenue initially advised the following tax treatment irrespective of shareholding:

  • Opting for the B Shares (Capital Option) – the return of value will be subject to capital gains tax treatment.
  • Opting for the C Shares (Income Option) – the return of value will be subject to income tax treatment.

However, since then, Finance Act 2014 provides that individuals who acquired shares in Vodafone as a consequence of an original investment by them in Eircom shares in 1999 and who received a return of value of €1,000 or less will not pay either Income Tax or Capital Gains Tax on the return of value (unless they opt to have the payment treated as income).

The return of value will be subject to capital gains tax rules – but because the base cost of the Vodafone shares (having their origin in Eircom shares acquired in 1999) is greater than the amount of the return of value received, no capital gains tax will be payable on returns ofvalue of €1,000 or less.

The Finance Act 2014 provisions will benefit many small shareholders who inadvertently found themselves subject to an unintended liability to income tax, rather than a NIL capital gains tax liability.

If you require any further information on the tax treatment of Vodafone Shares – Return of Value please contact our Tax Department.

Every care has been taken to ensure that the information as detailed above is correct. You must not rely on the information on this website as an alternative to advice from your Accountant, Tax Advisor or other professional services provider.