Auditor refuses to sign off accounts of Lycamobile UK

Auditors were unable to sign off the accounts of telecoms company Lycamobile UK, putting further pressure on the former Conservative party donor, which is also embroiled in a dispute with HM Revenue & Customs.

PKF Littlejohn said it had “not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion” for the company’s financial statements for the year ended December 31 2022, according to filings from Companies House, including over the recoverability of a due balance of almost £150mn.

The revelation follows the conviction of Lycamobile’s French entities of money laundering and VAT fraud last year, which prompted calls for Prime Minister Rishi Sunak to return donations.

The international mobile virtual network operator gifted £2.15mn to the Conservative party between 2011 and 2016, according to the Electoral Commission database.

PFK Littlejohn said it had been unable to obtain sufficient appropriate audit evidence over the “recoverability of a balance of £105,979,000 due from related parties” and “a balance of £41,704,000 due from directors and parties associated with directors”. It said it also lacked evidence concerning “the company’s ability to rely on the liquidity of the group . . . to provide financial support should it be required” and the “completeness and accuracy of the deferred income balance of £10,870,000” related to creditors.

The auditor added that management’s forecast indicated that in order to remain a going concern, the company would need to be able to collect the “related equity/party debtors” or rely upon financial support from the group if required.

It had also been “unable to determine whether a material misstatement of other information” existed, the report added.

The directors’ report in the filing said they “believe the company will be able to continue to operate and meet its obligations as they fall due for the foreseeable future”. It added financial risks had been mitigated by the availability of financial support from related parties, should it be required.

Lycamobile did not immediately respond to a request for comment.

Lycamobile UK swung to a pre-tax loss of £24.3mn for 2022 from a pre-tax profit of £8.4mn the previous year. This was despite the mobile virtual network operator reporting a 5 per cent rise in revenue to £145.4mn in 2022, compared with 2021.

The company also recorded a provision of £99mn in relation to a dispute over VAT with HMRC, which it said directors had increased since.

The dispute was heard at a tribunal in May. Lycamobile UK said it anticipated a decision in September at the earliest, according to the Companies House filing. It added once a decision has been made either party may appeal against it.

The Paris criminal court in October convicted Lycamobile’s French corporate entities of committing fraud with respect to value added tax and money laundering, fining them €10mn. Lyca Mobile France was appealing against the convictions and continued to “maintain its complete innocence”, Lycamobile said at the time.

A Tory official last year said: “All donations to the Conservative party are properly and transparently declared to the Electoral Commission, published by them, and comply fully with Electoral Commission rules.”