Frasers Group is in talks with EU tax authorities over a controversial VAT arrangement that has seen the retailer pay tax on overseas sales in the UK.

Documents filed at high court reveal that Sports Direct, prior to its rebrand to Frasers Group, came under scrutiny in Ireland, France and Finland over the tax arrangement, which saw the retail group pay all VAT on overseas sales to customers over a seven-year period.

The arrangement was facilitated through the set-up of a separate company called Barlin Delivery, which was run by Sports Direct founder Mike Ashley’s brother John, who is a computer scientist.

The company, which had no drivers or trucks, has already been the subject of intense shareholder scrutiny due to plans to pay Ashley’s brother John £11m for his services to the group.

It is understood that this same arrangement has prompted scrutiny from EU tax authorities over potential missed VAT payments, and current talks between said authorities and the retail group could lead to settlements.

Frasers Group told The Guardian that although Barlin had not been set up to reduce its tax bill, it suggested that some settlements had been reached with some foreign tax authorities while discussions were ongoing with others.

Scrutiny from EU tax authorities came to light as part of the Financial Reporting Council (FRC) investigation into why Frasers Group’s former auditors Grant Thornton did not disclose the relationship with Barlin.

Topics