HMRC’s refusal to raid top Tory donor Lycamobile to be investigated by MPs

HMRC’s refusal to raid top Tory donor Lycamobile to be investigated by MPs

After a French probe into Lycamobile uncovered money laundering and tax fraud, HMRC refused to raid the company, citing its political donations

HMRC’s refusal to raid top Tory donor Lycamobile to be investigated by MPs

MPs will investigate HMRC’s refusal to aid French prosecutors with a criminal investigation into telecoms company Lycamobile, after the taxman citied that the company “are the biggest corporate donor to the Conservative party.”

Nicky Morgan, head of the Treasury select committee, said this was “completely inappropriate” and that the committee will investigate HMRC’s conduct as part of its economic crime review, in conjunction with the public accounts committee.

A probe by French authorities, sparked by a Buzzfeed News investigation, uncovered a myriad of improper activities ranging from money laundering through shell companies to tax fraud relating to VAT and corporation tax avoidance.

After a raid of Lycamobile offices in France in 2016, 19 people were arrested and 9 charged.

Buzzfeed also drew attention to Lycamobile dropping backpacks stuffed with hundreds of thousands of pounds in cash at Post Offices around London.

French authorities wrote to HMRC requesting a raid on the telcoms company’s UK offices, and an official response from HMRC referred to Lycamobile’s donations to the Tory party and Prince Charles’ British Asian Trust.

The response also stated that due to the large, multinational nature of Lycamobile and the lack of “solid information” in the French request it was “extremely unlikely” the company would agree to have their premises searched.

The government said in a statement that information about Lycamobile’s political donations had “regrettably” been included in the response, but that it was intended as background information only.

HMRC added that it had rejected the French request on the grounds of “insufficient detail to satisfy the legal requirements to secure a warrant”, and that it had continued to liaise with French authorities about the investigation.

Buzzfeed reported that HMRC’s senior press officer strongly disputed that Lycamobile’s donations were cited as a factor in its decision to not conduct a raid. He said: “No HMRC official would ever write such a letter.”

“This is the United Kingdom for God’s sake, not some third world banana republic where the organs of state are in hock to some sort of kleptocracy.”

Lycamobile continues to deny all of Buzzfeed’s allegations and is suing Buzzfeed in France for libel.

Cosy club?

Sri Lankan-born tycoon Allirajah Subaskaran, who owns Lycamobile, has historically maintained a close relationship with the Tory party. The company donated more than £2.1m over several years and also helped fund Boris Johnson’s Mayoral campaign. Subaskaran was also part of the Conservative Party Leader’s Group, which saw him dining with the Prime Minister and members of cabinet on several occasions.

A Conservative party spokesperson said that it had ceased taking donations from Lycamobile in 2016 and that “HMRC never takes political donations into account when it makes decisions on whether to investigate a business.”

Cross-party condemnation

Political figures across the spectrum have raised concern over HMRC’s handling of the French request for assistance, and have said this case raises serious questions for the government and the taxman. Lord Macdonald, the former director of public prosecutions in England, said the government’s response was equivalent to “a descent into banana republic law enforcement”.

Labour leader Jeremy Corbyn stressed that by virtue the tax authority should be independent, and “investigate every company without fear and without favour about its tax affairs to make sure they pay the correct amount of tax and there’s no hiding place, no evasion from it, whoever they are.”

Liberal Democrat leader Vince Cable added that the situation was “deeply disturbing” and called on Theresa May to “take personal ownership” of the issue and return all donations until the issue is resolved.

Auditor raised alarm bells

Lycamobile’s auditor KPMG had raised alarm bells over a £134m hole in company accounts in 2016, commenting that “the audit evidence available to us was limited because of the complex nature of the related party structure the company operates within.”

KPMG resigned as auditor in May 2017 after three years, during which time it said it was unable to “obtain all the information and explanations from the company that we considered necessary for the purpose of our audit.”

There was some dispute as to who terminated the relationship, with Lycamobile CFO Michael Landau claiming it had dismissed KPMG, and KPMG insisting that it had made the decision.

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata


Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms


2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine


Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021


Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource