Monday, October 26, 2020

UK Lycamobile disputes allegations of tax avoidance in HMRC case

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A mobile phone firm that has been a major Tory donor is embroiled in three disputes with the UK tax authorities over at least £60m in allegedly unpaid tax.

Lycamobile donated £2.1m to the Conservatives between 2011 and 2016. The firm also supported Boris Johnson while he was seeking to be re-elected as London’s mayor. The disputes relate to corporation tax, VAT, PAYE and national insurance stretching back eight years.

Lycamobile, founded by businessman Allirajah Subaskaran in 2006, sells pay-as-you-go cards to individuals, often low-paid migrants, wanting to make cheap phone calls in the UK and abroad.

The HM Revenue and Customs (HMRC) has issued an official demand using its anti-tax avoidance powers in one case, and in another, a tribunal is due to be held to adjudicate the dispute.

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Lycamobile believes that it is not required to pay the tax demanded by HMRC in each case and is in discussions with the department.

The company has not made public the total amount of tax it would have to pay if it lost all three disputes. HMRC does not comment on the tax affairs of firms and individuals.

A fourth dispute, over a £8m bill, between Lycamobile and HMRC has recently been resolved after the department issued a penalty notice against the firm.

Johnson’s campaign to get re-elected as London’s mayor in 2012 used the firm’s Canary Wharf offices at least five times to conduct and coordinate telephone canvassing sessions.

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A year before, Johnson had praised the firm at one of its events, saying Lycamobile was as dynamic as London itself. Lycamobile also sponsored Johnson’s Diwali celebrations in Trafalgar Square in 2012 when he was mayor.

The firm has attracted criticism in the past over its financial affairs. In 2012, the Guardian disclosed that it had paid no corporation tax for three years. It has also risked being struck off as a company because it failed to publish its annual accounts on time. In 2016, its own auditors said its complex web of offshore and UK companies was so opaque that they could not account for £134m of assets.

In 2018, HMRC was accused of refusing to help French investigators into suspected money laundering by Lycamobile because it noted in secret documents that the firm was at that time the “biggest corporate donor to the Conservative party”. HMRC in turn said it was a mistake to cite the donations in the documents, adding that it had not helped the French investigatorsbecause they had not given enough information to justify such a move.

Two years earlier, French investigators had raided Lycamobile’s Paris office and arrested 19 employees. Lycamobile has denied any wrongdoing.

Lycamobile has outlined some of the details of its current disputes with the HMRC in its recent annual accounts. The firm declined to make any further comment when approached by the Guardian.

Lycamobile believes that it should not have to pay VAT on certain phone transactions and is going to a tribunal in March to fight HMRC. The firm estimates that it would have to pay £60m if it loses – a potential liability that has almost doubled in recent years. Lycamobile declined to say how much is at stake in the two other disputes.

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