160 Vodafone Group Plc Annual Report 2026
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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. The Group has 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, €3,145 million (21%) (2025: €3,065 million, 20%) of the deferred tax asset is forecast to be used within the next 10 years, and €6,319 million (41%) (2025: €6,194 million, 40%) used within 20 years. The losses are projected to be fully utilised over the next 46-50 years (2025: 47-52 years). The decrease in the recovery period compared to the prior year is principally a result of current year utilisation of the asset. An increase or decrease in the forecast income in Luxembourg in each year of 5%-10% would change the period over which the losses will be fully utilised by 2-5 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. 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. In 2025, the Government of Luxembourg enacted a reduction in the corporate income tax rate of 1%, resulting in a €719 million write down of the Luxembourg deferred tax asset. This adjustment had no impact on cash tax. In 2026, the Government of Luxembourg has announced its intention to reduce the corporate income tax rate by a further 1%. If enacted, this would result in a further write down of the existing Luxembourg deferred tax asset of approximately €640 million, with no impact on cash-tax or the utilisation period. 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. Deferred tax assets in the UK The merger between Vodafone UK and Three UK, which completed on 31 May 2025 resulted in the formation of two separate UK tax groups: the VodafoneThree tax group, and the Group UK tax group. VodafoneThree The VodafoneThree tax group has a recognised UK deferred tax asset of €2,067 million (2025: €nil due to the change in the tax groups referenced above). This asset consists primarily of excess capital allowances available to be claimed on a reducing balance basis, relating to qualifying plant and machinery held by the Vodafone and Three UK operating companies. In assessing recoverability, the Group has reviewed the latest five-year forecasts for the VodafoneThree UK tax group which reflect the inherent risks of operating in the telecommunications sector.
6. Taxation (continued) The tables below present the gross amount and expiry dates of losses available for carry forward for the year ended 31 March 2026 and the comparative year ended 31 March 2025. Expiring Expiring within beyond 31 March 2026 5 years 5 years Unlimited Total €m €m €m €m Losses for which a deferred tax asset is recognised 96 – 75,950 76,046 Losses for which no deferred tax is recognised
104 16,010 37,885 53,999 200 16,010 113,835 130,045 Expiring Expiring within beyond
5 years
5 years
Unlimited
Total €m
31 March 2025
€m
€m
€m
Losses for which a deferred tax asset is recognised Losses for which no deferred tax is recognised
68
– 78,045 78,113
98 15,982 40,403 56,483 166 15,982 118,448 134,596 The Group does not currently recognise deferred tax assets which are forecast to be used 60 years beyond the reporting period. Deferred tax assets on losses in Luxembourg Included in the table above are losses of €63,881 million (2025: €65,200 million) that have arisen in Luxembourg companies. A deferred tax asset of €15,248 million (2025: €15,563 million) has been recognised in respect of these losses, as the Group concluded it is probable that the Luxembourg entities will continue to generate taxable profits in the future against which the Group 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 pre-existing losses on a first-in-first-out basis. The Luxembourg companies have €15,958 million (2025: €15,958 million) of post-2017 losses, which will fully expire in 14 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. The Luxembourg companies utilised €1,319 million of their pre-2017 losses in the current year, representing 2% of the recognised deferred tax asset. 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.
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