Income tax expense represents the sum of current and deferred taxes.

Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The Group’s liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the reporting period date.

Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable temporary differences or taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference, or net temporary difference in a transaction that gives rise to both taxable and deductible temporary differences, arises from the initial recognition (other than in a business combination) of assets and liabilities and affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are also not recognised to the extent they arise from the initial recognition of deductible goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint arrangements, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting period date and adjusted to reflect changes in the Group’s assessment that sufficient taxable profits will be available to allow all the recognised asset to be recovered.

 

 

 

Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis.

Tax is charged or credited to the income statement, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the tax is recognised in other comprehensive income or in equity.

 

 

 

The table below explains the differences between the expected tax expense, being the aggregate of the Group’s geographical split of profits multiplied by the relevant local tax rates and the Group’s total tax expense for each year.

 

Notes:

 

 

 

 

 

 

 

 

The table below is an analysis of movements in the net deferred tax asset balance during the year.

 

Deferred tax assets and liabilities, before offset of balances within countries, are as follows:

 

Analysed in the balance sheet, after offset of balances within countries, as:

 

At 31 March 2024, deferred tax assets and liabilities, before offset of balances within countries, were as follows:

 

At 31 March 2024, analysed in the balance sheet, after offset of balances within countries, as:

 

 

 

 

The Group’s future tax charge, and effective tax rate, could be affected by several factors including tax reform in countries around the world, including any arising from the OECD’s or European Commission’s work on the taxation of the digital economy and European Commission initiatives such as the Minimum Tax directive, Business in Europe: Framework for Income Taxation ‘BEFIT’ or as a consequence of state aid investigations, future corporate acquisitions and disposals, any restructuring of our businesses and the resolution of open tax issues (see below).

The Group is routinely subject to audit by tax authorities in the territories in which it operates. The Group considers each issue on its merits and, where appropriate, holds provisions in respect of the potential tax liability that may arise. As at 31 March 2025, the Group holds provisions for such potential liabilities of 314 million (2024: 445 million). These provisions relate to multiple issues across the jurisdictions in which the Group operates.

As the tax impact of a transaction can be uncertain until a conclusion is reached with the relevant tax authority or through a legal process, the amount ultimately paid may differ materially from the amount accrued and could therefore affect the Group’s overall profitability and cash flows in future periods. See note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated financial statements.

The tables below present the gross amount and expiry dates of losses available for carry forward for the year ended 31 March 2025 and the comparative year ended 31 March 2024.

 

 

Included in the table above are losses of 65,200 million (2024: 67,016 million) that have arisen in Luxembourg companies. A deferred tax asset of 15,563 million (2024: 16,714 million) has been recognised in respect of these losses, as we conclude it is probable that the Luxembourg entities will continue to generate taxable profits in the future against which we can utilise these losses. These tax losses principally arose from historical impairments, primarily following the acquisition of the Mannesmann Group in 2000. These losses also arose prior to the 2017 tax reform in Luxembourg and are available to carry forward indefinitely.

Losses incurred after the 2017 tax reform in Luxembourg, expire after 17 years and can only be used after any losses on a basis. The Luxembourg companies have 15,958 million (2024; 15,933 million) of post-2017 losses, which will fully expire in 15 years. No deferred tax asset is recognised for these post-2017 losses on the basis that they are not forecast to be used prior to the expiry of their 17 year life.

We also have 9,136 million (2024: 9,136 million) of Luxembourg losses in a former Cable & Wireless Worldwide Group company, for which no deferred tax asset has been recognised as it is uncertain whether these losses will be utilised.

During the year, the Luxembourg Corporate Income Tax rate reduced by 1% causing a write-down of the by 719 impact. The Luxembourg companies utilised 1,815 million of their losses in the current year, representing 433 million of the deferred tax asset and 2.8% of the recognised deferred tax asset.

Following restructuring in December 2022, which saw the Luxembourg companies dispose of their investments in the Group’s operating companies, the profits and losses in Luxembourg are no longer expected to be significantly impacted by changes in the value of the Luxembourg companies’ investments. The recovery of the deferred tax asset is expected to be driven by the recurring profits of the Luxembourg companies.

These recurring profits are derived from the Group’s internal financing, centralised procurement, and international roaming activities. These activities have consistently generated taxable profits of over 1 billion per annum throughout their existence. The Group has reviewed the latest five-year forecasts for the Luxembourg companies, including their ability and the Group’s intention to continue to generate income beyond this period. The forecasts consider the impact of the current market conditions on the existing financing activities, including the current view of future interest rates, levels of intragroup financing, as well as the future profits generated from the procurement and roaming activities.

This assessment also included a review of the commercial structures supporting the profits generated from these activities and considered the factors, under the Group’s control, which could impact the ability of these activities to generate taxable profits. We have assessed that the current structure continues to be sustainable under the tax laws substantively enacted at the reporting period date and the Group’s intentions to keep these activities in Luxembourg remains unchanged.

 

 

 

Based on the current forecasts, 3,065 million (20%) (2024: 3,306 million) of the deferred tax asset is forecast to be used within the next 10 years, and 6,194 million (40%) (2024: 6,344 million) used within 20 years. The losses are projected to be fully utilised over the next 47 to years (2024: 52 to 57 years).

The decrease in the recovery period compared to the prior year is principally a result of higher forecast interest rates, margins on existing financing activities. An increase or decrease in the forecast income in Luxembourg in each year of would change the period over which the losses will be fully utilised by 3 to 6 years either way. The Group uses different scenarios to forecast income to understand the impact that a change in interest rates or level of debt advanced by the Luxembourg companies could have on the recovery period of the losses.

The Group does not currently recognise deferred tax assets which are forecast to be used 60 years beyond the reporting period date.

Any future changes in tax law or the structure of the Group could have a significant effect on the use of the Luxembourg losses, including the period over which these losses can be utilised. On the basis that future changes in tax laws are unknown, the profit forecasts assume that existing tax laws continue.

Based on the above factors the Group concludes that it is probable that the Luxembourg companies will continue to generate taxable profits in the future against which it will use these losses

The Group has a recognised deferred tax asset 2,566m (2024: 2,485

Based on the current forecasts, the deferred tax asset is expected to be recovered over the next 46 years (2024: 27 years). The recovery period has increased compared to the prior year primarily due to an updated forecast of future taxable income arising in the UK tax group in addition to refinements to our modelling of future UK taxable income.

In June 2023 we announced a binding agreement to combine our Vodafone UK business with Three UK to form a new merged UK business (the “merged UK Group”). Following the completion of this transaction merged UK Group will form a separate UK tax group, and the recognition of Vodafone UK’s deferred tax asset will be assessed by reference to the taxable profit forecast of that newly combined business. The deferred tax assets of the remainder of the UK group will be assessed by reference to the taxable profits generated by existing group service activities, brand and financing income, including that arising from lending into the merged UK group. We expect the recovery period of the deferred tax assets of both the merged UK group and the remainder of the UK group to be lower than 46 years at 31 March 2026.

The Group has a recognised deferred tax of 1,950 million (2024: 2,029 million) in Germany in respect of losses arising primarily on the write down of investments in Germany in 2000. The losses relate to German corporate tax and trade tax liabilities and they do not expire. The Group concluded it is probable that the German business will generate sufficient taxable profits in the future against which we can utilise these losses. The Group has reviewed the latest five -year forecasts for the German business, and the inherent risks of operating in the telecommunications business. In the period beyond the forecast, the Group continues to take into consideration the implications of the Growth Opportunities Act, substantively enacted in March 2024 which introduces new interest restriction rules applying to both corporate and trade tax and for which a grace-period to 31 December 2024 was introduced during the year. We expect to fully utilise the trade tax losses within years, and corporate tax losses within years.

No deferred tax liability has been recognised in respect of a further 39,199 million (2024: 38,380 million) of unremitted earnings of subsidiaries because the Group is able to control the timing of the reversal of the temporary difference, and it is probable that such differences will not reverse in the foreseeable future. It is not practicable to estimate the amount of unrecognised deferred tax liabilities in respect of these unremitted earnings.