HMRC has refused to confirm whether it has been investigating troubled JJB Sports over claims that it erroneously charged VAT on children's replica football kits.

The Daily Telegraph reports that the mistakes were made over a three year period stretching back to 2006. JJB Sports had previously warned of a £5.3m provision related to HMRC in its annual report, but there were no known details of what this related to.

The paper says that mistakes in allocating codes to certain lines of clothing meant thousands of items had VAT allocated to them. Children's clothing is exempt from the tax.

Fresh details about the issue have emerged after they were sent to HMRC and to Mike Ashley's Sports Direct, a strong contender to buy the beleaguered sports group out of administration.

Last week the group issued a statement which warned that while it continued to hold discussions with various parties it was 'unlikely that any value will be attributable to the ordinary shares.'

KPMG was appointed to handle the sale of the retailer following several rocky years for the chain that saw some £200m injected into it in numerous bids to revive its flagging fortunes.

JJB currently employs 4,000 staff across its 180 stores and Wigan-based head office. Reports have suggested that around half of its employees could be axed as part of a sale with a buyer likely to shut up to many of its shops.

Sports Direct has been widely tipped as the most likely buyer now that JD Sports has said it will not be making a bid.

Both JJB and HMRC declined to comment.