“Lycamobile, the international phone call business and a major donor to the Conservative party, is embroiled in a £26m tax dispute with HMRC over VAT.
Accounts filed with Companies House show that Lycamobile’s UK division nearly doubled its pre-tax profits to £10.9m last year on turnover of £194m.
But the company, owned by Sri Lankan-born tycoon Allirajah Subaskaran, also revealed that it could face a bill of £26m from HMRC, including “potential penalties”, due to a dispute over VAT. …
… Auditors from KPMG have revealed that they are unable to form an opinion on the accounts due to a lack of “sufficient appropriate audit evidence”.
Last year, the accounting firm flagged up its confusion over £134m in funds owed to Lycamobile UK by related companies, adding that the knock-on effect on this year’s accounts meant it was still lacking information.
“Because of the significance of the matter […] we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion,” said KPMG. “Accordingly we do not express an opinion on the financial statements.”
It added: “We were unable to determine if adequate accounting records have been kept by the parent company.”
Lycamobile UK’s own directors’ report admitted that the tax dispute and complex structure create “material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern”.
The Labour party and tax experts said the accounts raised questions for the Conservative party, which accepted £614,300 from Lycamobile in 2016 and nearly £1m the year before.
Tax accountant Richard Murphy said KPMG’s audit report and the VAT dispute raised “massive uncertainty” about Lycamobile’s financial position.
He said: “In the circumstances anyone dealing with the company has been given notice as to the risk they take. And the Conservative party is especially vulnerable. Taking donations from a company subject to this level of doubt as to its true financial position looks unwise. They’d do themselves a favour by saying no to further offers for the time being.” …