// Frasers Group is being scrutinised by EU tax authorities over a VAT arrangement
// The arrangement involved it paying VAT in the UK on all of its sales to customers overseas over a seven-year period
// This prompted scrutiny from EU tax authorities over potential missed VAT payments
Frasers Group is being scrutinised by EU tax authorities over an arrangement that saw it incorrectly pay VAT in the UK in the last seven years.
Documents filed at the High Court reveal that Sports Direct, prior to its rebrand to Frasers Group, is being probed in Ireland, France and Finland due to an arrangement that saw it pay VAT in the UK on all of its sales to customers overseas over a seven-year period.
The arrangement involved the set-up of a separate company called Barlin Delivery to deliver orders abroad, although it had no drivers or trucks and was run by John Ashley, a computer scientist and brother of Frasers Group boss Mike Ashley.
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Barlin Delivery has already been the subject of shareholder scrutiny due to plans to pay Ashley’s brother £11 million for his services.
However, this arrangement has prompted scrutiny from EU tax authorities over potential missed VAT payments.
Talks currently taking place between the tax authorities and Frasers Group could lead to settlements.
Frasers Group told The Guardian that although Barlin Delivery had not been set up to reduce its tax bill, it suggested it had settled with some foreign tax authorities while discussion were ongoing with others.
The news comes in the wake of the Financial Reporting Council (FRC) investigation into why Frasers Group’s former auditors Grant Thornton did not disclose the relationship with Barlin Delivery.
Details of the EU tax authorities’ scrutiny emerged after the FRC engaged thinktank TaxWatch to analyse court papers for its investigation.
Cross-border tax rules stipulate that if a retailer arranges delivery for a purchase, the sale is deemed to have taken place in the buyer’s country of residence. But if the buyer arranges collection from the UK, the sale is deemed to have taken place in the UK.
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