in the back
Good call
Lycamobile, Issue 1471
subaskaran.jpg
Lycamobile owner Allirajah Subaskaran (pictured) is a major Tory donor
HM Revenue & Customs is trying to fine the company of a top Tory donor £8.2m for “failure or obstruction” and not paying enough tax, according to Lycamobile accounts released in May.

The mobile phone firm has given the Tories £2.1m since 2011 and its owner, Allirajah Subaskaran, is a regular at dinners-for-donors with Conservative ministers, supping in 2016 with Theresa May, Philip Hammond, Jeremy Hunt and Sajid Javid, as well as the now-departed David Cameron and George Osborne.

Multiple disputes with HMRC
As the Eye revealed in 2013 (issue 1335), Lycamobile had paid little or no tax. Its network includes a firm in the low-tax offshore Portuguese island of Madeira, from which Lycamobile UK buys multimillion-pound bundles of phone calls, effectively transferring income to the low-tax jurisdiction. Lycamobile is now in multiple disputes with HMRC, many of which appear to be related to the Madeira money.

HMRC’s attempt to fine Lycamobile shows up in the latest accounts of a firm called WWW Holding Company, the group’s top company. According to the latest accounts, the Lycamobile group faces “a tax-related claim for the financial years 2012 and 2013 under paragraph 50 of Schedule 36” of the Finance Act 2008. Paragraph 50 says HMRC can impose penalties on companies for “failure or obstruction” of the taxman, which can include someone who “deliberately obstructs an officer”, fails to answer HMRC questions, or “conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document”. According to the accounts, the £8.2m “equates to an HMRC estimate of corporation tax” which should have been paid in 2012 and 2013.

The potential fine comes on top of £7.6m the company has already put aside as a possible payment to HMRC “with regard to ongoing inquiries by HMRC into the Controlled Foreign Company (CFC) Tax Regime”, also listed in the new accounts. The possible CFC charge appears to relate to the Madeira cash revealed by the Eye. In addition, Lycamobile says it owes £1m in “diverted profits tax”, a special tax introduced to stop tax avoidance by multinationals (Eye 1469).

Wriggling free
HMRC appears to have caught up with Lycamobile, but the firm hasn’t given up hope of wriggling free. Regarding the £8.2m fine, which will be decided by a tax tribunal, Lycamobile says “the directors dispute this claim in full”. Regarding the £7.6m put aside for the CFC claim, the firm says it does not think it owes this money and “the directors believe that they have strong grounds and strong arguments to support the company’s CFC position”.

A problem exists, though, in the accounts for WWW Holding Company, which were “qualified” by accountants PKF Littlejohn on grounds that the firm had “not complied with the requirements of the Companies Act 2006 to prepare consolidated financial statements that include the company and its subsidiaries (the group)”. In a limp excuse, the accounts state that “the company continues to experience significant resource constraints and as a result the directors have been unable to prepare consolidated financial statements”.

Private Eye asked Lycamobile what “resource constraints” could possibly stop it from complying with the law by recording all the group’s finances. After all, Lycamobile UK has turnover of £167m and profits of £11m, while its Madeira company has a staggering £947m turnover. We also asked Lycamobile what kind of “failure or obstruction” HMRC had identified. The firm declined to make any statement.

More top stories in the latest issue:

SHORROCKS HORROR
More chicanery as MPs ask questions about the costly and convoluted Swansea lagoon electricity project.

SORE RIPPLES
The Canal & River Trust charity shells out £60,000 for a new logo, while pleading for donations for urgent canal repairs.

METHADONE MADNESS
Staff at a Wakefield prison missed vital opportunities to save the life of a woman who died from a lethal mixture of prescribed drugs.

HOT POTATO
MPs call on the Ministry of Defence to rethink plans to privatise the defence fire service, with only Capita and Serco in the running for the deal.

AMBER LIGHT
Trouble at the Institution of Mechanical Engineers following the collapse of rail training company Amber Train.

WAGES OF SPIN
No happy ending in sight for striking underpaid staff at the Royal Museums Greenwich.

NARROWING FIELDS
Residential outdoor education centres under threat from cuts and closures.

GREENWICH LEAN TIME
Taxpayers shell out £1.5m over school land as academy is rebrokered to a new sponsor.

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