Companies House reveals telephone airtime retailer has failed to file accounts for last year amid continuing questions over firm’s financial affairs

This article is more than 4 years old

This article is more than 4 years old

Lycamobile, one of the Conservative party’s largest corporate donors, is at risk of being struck off the register of UK businesses after failing to file accounts on time.

The company, which has handed millions to the Tory party, is already facing the possibility of a £9.5m bill from HM Revenue & Customs for unpaid tax.

Now Lycamobile, which sells international telephone airtime, has missed a deadline to publish accounts for last year by two months, according to Companies House filings.

Companies House is understood to have sent two warning letters to the company, controlled by the Sri Lankan businessman Subaskaran Allirajah, without reply.

The next step would involve having the company listed for late filing in the London Gazette in early February.



The listing would begin an ultimatum period that could see the company struck off the register of British businesses within two months.

At that point a new company would have to be set up to house Lycamobile’s UK business.

Despite its failure to file accounts, Lycamobile has been a generous donor to the Conservative party, handing it £1.5m since 2011.

Its latest available figures, from 2014, reveal it swelled Tory coffers by £146,600 last year, despite making a profit of just £767,000 after tax.

The delay in filing new accounts comes with Lycamobile facing a string of questions over its financial affairs.

The company is in talks with HMRC over a potential tax liability of around £9.5m linked to its complex international corporate structure.

Accounts from 2014 reveal that Lycamobile paid £108m to Lycatelcom LDA, a company based in the Portuguese tax haven of Madeira, ostensibly for mobile phone airtime.

The payment, which involves 76% of its overall cost of sales for that year, had the effect of transferring income to the low tax jurisdiction.

Income accrued at a foreign subsidiary of a UK firm is subject to tax under the Controlled Foreign Company rules.

The latest available accounts for this Portuguese division show it had just four employees, despite reporting £433m of turnover.

Two of those employees, Richard and Filomena Benn, run a Madeira-based company that specialises in “tax planning”.

Accounts for WWW Holding Company – another firm in the Lycamobile network – reveal that HMRC has raised “initial inquiries” over £9.5m in potentially unpaid tax.

It is not clear whether these discussions relate to the Madeira-based subsidiary.

However, in a statement buried in the accounts, the firm admits: “The directors are in the process of assessing the company’s operating model and group structure with regard to the Controlled Foreign Company tax regime.”

Tax expert Richard Murphy said Lycamobile’s complex cross-border financial architecture raises questions over its tax contribution.



He said the arrangement gave him “considerable concerns about the pricing of this contract”.

“These accounts suggest that, firstly, we need more information to appraise the impact of the transactions this company undertakes, including full country-by-country reporting for all the companies with which it has relationships.”

He added: “Second, penalties for late filing of accounts, and prosecutions for doing so, need to be stepped up..”

Accounts from previous years show that Lycamobile’s UK arm did not pay any tax between 2008 and 2010, despite generating a turnover of between £47m and £88m.



The firm’s most recent accounts also show that auditors KPMG were not able to obtain enough information to sign off on adjustments made to financial information from previous years.

KPMG began auditing the firm after EY resigned from the duty in 2014.

Lycamobile’s failure to file its accounts, hard on the heels of admitting it is in talks with HMRC over its tax affairs, adds to the controversy around the company.

An investigation by BuzzFeed revealed that Lycamobile employees were depositing rucksacks full of cash, some containing up to £250,000, at the Post Office.

There is no suggestion of any connection to the late filing of accounts and Lycamobile has said its cash deposits were “day-to-day” banking sanctioned by the Post Office.

Another company in Subaskaran Allirajah’s business empire is under investigation in Sri Lanka, over allegations it was used to channel cash to the former president.

Again, there is no suggestion of any link between the Sri Lankan investigation and the rest of the Lycamobile empire.