Lankan-owned British telecom giant’s offshore account comes under spotlight

Lycamobile operated by Sri Lankan Dinesh Alirajah uses a complex web of offshore and UK companies so opaque that its own auditors cannot account for £134m of assets, according to a recent report in Britain’s Guardian newspaper. Here are excerpts: The financial affairs of the international telephone calls firm were described as “deeply worrying” by experts who also raised questions about the effect of the firm’s arcane structure on its UK tax bill.

Revelations about the firm, which has given more than £1.5m to the Tories since 2011, come as the prime minister is under pressure to crack down on tax havens…...

The shadow chancellor, John McDonnell, said: “If this is true, then it’s time the Tories finally took this issue seriously and refused to take further donations from any company that has funnelled money via tax havens.

“The Tories can’t keep getting embroiled in tax avoidance scandals and not raise a finger.

“Otherwise the public will think that when the cameras are on the Tories talk tough on tax avoidance, but when they think no one’s watching they take the money from tax havens.”

Accounts filed by Lycamobile at Companies House reveal that auditors KPMG warned that its staff “have not obtained all the information and explanations that we consider necessary for the purposes of the audit”.

KPMG highlighted £ 134m owed to Lycamobile by related companies, “for which the audit evidence available to us was limited because of the complex nature of the related party structure the company operates within”.

The big four accounting firm, which has signed off Lycamobile’s accounts since its rival EY resigned in 2014, added that it was “unable to determine whether adequate accounting records have been kept”.

Tax experts said the lack of clarity around Lycamobile’s accounts, filed six months later than they were originally due, showed the risks presented by complex multinational corporate infrastructure.

Alex Cobham, director of research at the Tax Justice Network, said KPMG’s warning was deeply worrying and pointed to “an absence of internal record keeping that beggars belief”. Richard Murphy, director of tax research and a professor of practice in international political economy at City University, said the accounts showed the “danger of offshore secrecy”.

He said: “Lycamobile is so good at shifting substantial sums of money around its group that even the auditors, with full access to the books, cannot work out where that money has gone and if it can still be repaid.”

And he warned that the lack of clarity over the £134m made it hard to assess whether Lycamobile can pay its debts, which include £ 3.6m due to HMRC, £ 7.5m in advances from customers and nearly £18m owed to other businesses. “Let’s not pretend offshore secrecy and complexity has no consequence here in the UK.

“These accounts prove that there is real resulting risk in the UK from the complexity Lycamobile has created in tax havens and elsewhere at potential cost to us all.”

It also emerged that Lycamobile’s UK operation bought £81m worth of mobile phone airtime last year from Lycatelcom LDA, a company based in the low tax jurisdiction of Madeira. The latest available data for this Portuguese division show it had just four employees, despite reporting £433m of turnover.