Toys R Us was last night accused of funnelling £584million into an offshore tax haven as it teetered on the brink of collapse – putting 3,200 jobs at risk.
The ailing retailer, which could go into administration today, has been criticised for the write-off of a mystery £584.5million loan to a company in the British Virgin Islands, a territory commonly used by firms for tax avoidance purposes.
Tax experts have called for an investigation into the accounts, accusing Toys R Us of secrecy and tax dodging.
The firm, which saw losses of £673million in the year to January 28, has been struggling as it battles online shopping.
Ploys-R-Us: Tax experts have now called for an investigation into Toys R Us accounts, accusing the company of secrecy and tax dodging
A make-or-break meeting with creditors today will decide whether to approve a rescue deal proposed by Toys R Us, or force it into administration.
Accounting professor Prem Sikka, at Essex Business School, likened the lack of transparency to the management of retailer BHS, which collapsed last year leading to the loss of 11,000 jobs.
'I think, frankly, there should be an investigation here. The UK's accounting rules prevent companies like this from providing cash flow statements meaning that no one can see what is going on behind the scenes,' he said.
'Why on earth did they have all these subsidiaries based offshore? The straight answer is that it offers it a degree of secrecy and confidentiality. And there must be a tax angle or there would be no point in putting the money into the British Virgin Islands.'
Richard Murphy, a tax professor at London's City University, suggested the loan could have been used to buy property as a way of avoiding stamp duty and capital gains tax.
'Whatever they bought is now devalued because the company isn't making money as its business model is fundamentally flawed,' he said.
'People don't want to go to big out-of-town locations to buy toys, they want to use Amazon and so those giant warehouse stores used by Toys R Us are not worth a lot of money. The loan write-off proves that it was a bad investment decision.'
A gaping £30million black hole in Toys R Us's retirement fund has also prompted concern. It has come under scrutiny from MPs after it emerged trustees of the pension scheme were not informed about the multi-million-pound loan write-off.
Labour MP Frank Field, the chairman of the Work and Pensions Committee, said: 'As with BHS, the trustees and pensions regulator were kept entirely in the dark. The pension scheme is, at best, an inconvenient afterthought to self-interested corporate restructure.
The puny regulatory system only kicks in once the damage is done.' Toys R Us wants approval for a company voluntary agreement, so it can close 26 of its 105 stores, deliver savings – and give it a chance of survival.
However, it needs the approval of The Pension Protection Fund, the pensions lifeboat for failing firms, which will not back the deal unless Toys R Us pays £9million into its retirement fund. The retailer says it cannot afford to do so.
Toys R Us did not comment.
TOP DIY INVESTING PLATFORMS
( π ) Pi is a new digital currency developed by Stanford PhDs, with over 15 million members worldwide. To claim your Pi, follow this link https://minepi.com/yildiztekin Download from your mobile phone and use username (yildiztekin) as your invitation code. Then mine from your mobile or desktop to collect Pi coin everyday.