Written by: Keith Tully
Published: 19th February 2018
HMRC has hit the struggling retailer Toys R Us with a VAT bill worth around £15 million with the business already in the midst of a serious financial crisis.
Toys R Us, which employs more than 3,000 people in the UK, came close to collapse towards the end of last year and its bosses have been working on rescue plans ever since.
Various investors have been in discussions with stakeholders with a view to potentially taking full or part ownership of the company but its latest tax bill now means its future is again in serious jeopardy, according to reports from Sky News.
A Company Voluntary Arrangement (CVA) was approved by the retailer’s creditors shortly before Christmas, with around 800 jobs already being shed by Toys R Us in the UK as part of those rescue plans.
However, the prospect of administration has now seemingly moved much closer with HMRC having given Toys R Us until February 27th to settle its outstanding tax bills understood to be worth around £15 million.
A number of potential financial backers are believed still to be interested in helping to rescue the famous toy company but serious concerns remain about the financial position that the business currently finds itself in.
Plans to reshape and potentially turnaround Toys R Us via its CVA agreements quickly ran into difficulty in the form of disputes with the Pension Protection Fund, which said it could not support the intended rescue strategy for the business unless millions of pounds were added to its pension funds.
The problems relating specifically to the Toys R Us pension fund were resolved recently but it remains to be seen whether the issue of a £15 million VAT bill can also now be overcome.
Toys R Us has been operating in the UK since the mid-1980s and has a total of more than a hundred outlets nationwide.
Its businesses across Europe and around the world have been struggling to deliver profits in recent years and fell into serious financial crisis in 2017 after its North American operation filed bankruptcy proceedings towards the end of the year.