Investors are concerned about home credit company International Personal Finance's (IPF) eye-watering £20m appeal against a local tax authority in Poland.
If the appeal fails, IPF may be in hot water with its shareholders who have cautiously sold stock, causing the business to trade 7.9% lower at 162p.
The company says its Polish operations, Provident Polska, is appealing a decision by the Polish Tax Chamber that it was booking profits at the wrong time. IPF says it books profits at the time of collection, but the tax authority argues it should be booked when the contract is signed. The discrepancy dates back to 2008.
In a surprise twist, the credit firm says its tax method was accepted as correct in 2003 and 2004 and this has not changed since then. Its 2009 accounts may also be subject to a similar decision.
The company will pay £20m to appeal the decision to the District Administrative Court.
IPF is also disputing a transfer pricing challenge relating to an intra-group arrangement with a UK entity. This arrangement is a transaction under which the Polish subsidiary transfers the credit risk in its portfolio to a UK company in the group, which was implemented in 2003.
It was reviewed by the Polish tax authority during an audit of the financial years 2003 to 2004. The Tax Audit Office confirmed the intra-group arrangement was correctly dealt with in 2007.
In a bid to avoid double taxation on the intra-group transaction, IPF says it is also initiating a process with the UK tax authority.
