Underlying earnings at Vodafone's British operation rose from £1.2bn to £1.3bn in the year to the end of March, while adjusted profits rose 16% to £402m. Its corporation tax bill fell from £140m to zero, according to the investigation from The Sunday Times.
Its UK business accounts for less than 4% of group profits and it paid the exchequer about £700m in payroll and other taxes last year.
Vodafone, which is based in Newbury, Berkshire, has 19 million UK customers. The company was able to reduce its corporation tax liabilities in Britain last year by off-setting the bill against its capital expenditure, which rose from £516m to £575m, including investment in improving its network and by interest costs.
It has previously been criticised for ‘sweetheart deals’ with HMRC after its £1.2bn settlement of a decade-long dispute in 2010. An investigation by former High Court judge Sir Andrew Park into the deal is due to be published on Thursday this week.
Speaking to economia in March, Andy Halford, the CFO of Vodafone, said, “This area of tax law has been a problem for many companies for years, and successive governments have admitted UK legislation is wholly unclear.
“We and all other multinationals currently present in the UK would welcome greater clarity in the future. "
A Vodafone spokesman said: "As in most countries, there are tax reliefs for capital investment and interest costs in the UK, which applied in this case. We paid £14bn into the public purse worldwide in 2011 if one includes payroll and sales taxes as well as fees for radio spectrum."
Vodafone's global corporation tax bill rose by about £300m to £2.3bn last year.