Brussels has demanded that Britain pay billions of pounds in duties over an alleged customs fraud that further discredits Theresa May’s beleaguered Chequers plan for Brexit.

The European Commission announced on Monday that the UK had two months to pay £2.4 billion, plus interest, in unpaid VAT on cheap Chinese clothes and shoes or face huge daily fines at the EU’s top court.

The final warning before the UK is referred to the European Court of Justice was issued days after EU-27 leaders issued a humiliating rejection of the hard-won Chequers plan at an EU summit in Salzburg on Thursday.

Britain ignored repeated warning over the risk of fraud on Chinese shoes and textile imports, the commission said, and failed to take effective action, which meant customs duties were not collected and paid into the EU budget.

A British government spokesman said, “The UK does not accept liability for the alleged losses or recognise the estimate of alleged duty evaded. We take customs fraud very seriously.”

Olaf, the EU’s anti-fraud agency, has accused UK importers of evading a "large amount" of customs duties by using fictitious and false invoices and incorrect customs value declarations on cheap shoes and clothes from China travelling to the EU through British ports.