Catalogue of errors left JJB owing £5m to the taxman

Poor financial controls and accounting mistakes at JJB Sports left the beleaguered sportswear chain owing HM Revenue and Customs more than £5m recently.

The i has learnt that the retailer, which remains on the verge of being sold out of administration to a new owner today, made errors relating to VAT payments on children's and adult clothing and footwear from leading brands such as Nike and Adidas.

The bulk of the errors, which continued at JJB for four years until 2010, related to clothing for children aged 14-plus. Children's clothing is exempt from VAT.

The VAT accounting mistakes come as JJB remains locked in talks with rival Sports Direct, which remains interested in buying part of JJB, but up to half of the Wigan-based chain's 180 stores could close. The Dublinconglomerate Stafford is also interested.

Documents seen by i show that 3,463 items were erroneously coded between 2006 and 5 August 2010, which led to a £5.46m total of VAT undeclared. However, it also incorrectly charged customers £404,162 VAT, which left it with a "net amount payable" to HMRC of £5.05m.

JJB and HMRC declined to comment. But JJB's annual report for the year to 29 January shows an "HMRC provision" of £5.32m. JJB is thought to have paid back the bulk of the outstanding amount, and its suitors are aware of the liability. Dave Williams, who joined the board as finance director in January 2011, is understood to have made HMRC aware of the VAT mistakes in July of that year.