Mike Ashley’s retail empire Frasers Group has told shareholders it is in the clear with Belgian authorities over an alleged €674m tax bill.
Publication of the company’s full year results was delayed last year after directors clashed with auditors over the €674m (£571m) tax inquiry into unpaid VAT in Belgium.
Now Frasers has said the Belgian tax authorities have dropped the largest part of their investigation against the company.
The authorities had been looking into a number of matters, including ‘Matter 1’, which accounts for €491m (or 73%) of the total €674m.
The Sports Direct parent business now said the tax authorities are “satisfied with the explanation provided” by the retail firm over the first matter of its tax dispute.
It said Belgian tax authorities are satisfied with the group’s explanation and that the confusion had been down to clerical errors over the reclaiming of VAT and that the correct about of tax had been paid.
EU reverse charge rules dictated that VAT should “neither have been paid by the UK entity or reclaimed by the Belgian entity”, it said.
Frasers Group said in a statement: “The Tax Authority has now confirmed in writing that it has completed its review of Matter 1 and that it is satisfied with the explanation provided.
"Accordingly, in respect of Matter 1, VAT has been correctly accounted for in Belgium, Matter 1 has been withdrawn from the proces verbal by the Belgian Tax Authority.
“Also noted in the Interim Results announcement of 16 December 2019 was the discovery of some clerical reporting errors.
“These historical clerical reporting errors included the paying of VAT to the Tax Authority by a Frasers Group UK entity on goods shipped to a Frasers Group Belgian entity with a simultaneous reclaim of the same VAT by that Belgian entity.
“Due to EU reverse charge rules, VAT should neither have been paid by the UK entity or reclaimed by the Belgian entity and, although the net result was that the correct amount of VAT due to the Tax Authority had been paid, the documentation provided and process followed were incorrect.
“Frasers Group and its advisers will continue to fully engage and work with the Belgian Tax Authority in order to resolve the smaller remaining matters referred to in the proces verbal as soon as possible.
“Frasers Group management still believe that it is less than probable that material VAT and penalties will be due in Belgium as a result of the tax audit.”
Sports Direct’s was renamed Frasers Group to taked the name of the Glasgow based department store chain bought by Mr Ashley in 2018.
