In a statement, KPMG said: ‘We could not obtain sufficient, appropriate audit evidence at Lycamobile UK Ltd (and for related audits of its related UK companies) as a result of the governance structure and oversight of the companies’ system of internal control over financial reporting.

‘We have been auditor for three years and have worked tirelessly with the company over that time. But as with 2014 and 2015, again in 2016 we were not able to obtain all the information and explanations from the company that we considered necessary for the purpose of our audit. We were also unable to determine whether adequate accounting records have been kept by the company.

‘Resigning an audit is not a step we take lightly. However we do not believe that it is appropriate to remain as auditor when underlying factors giving rise to qualifications to our audit opinion of this nature and significance remain outstanding over a period of time.’

A note to the annual report and consolidated financial statements for the year ended 29 February 2016 references an ongoing dispute with HMRC over ‘certain VAT positions’ taken by Lycamobile between 1 July 2012 and 29 February 2016. The original amount at stake was £19.3m including penalties, which has now increased to £25.9m.

In addition, there is another dispute over £669,999 of diverted profits tax, and the note also references ongoing discussions and enquiries between Lycamobile and HMRC over related party transactions between the company and certain related party companies.

The circumstances of KPMG’s resignation have become a matter of dispute, with Lycamobile putting out a statement saying the company had ‘given formal notification to terminate’ KPMG’s position last month, on 24 April and that therefore it was the company which had terminated the relationship with the auditor, rather than the auditor resigning as KPMG stated.

Responding to this claim, KPMG said in a further statement: ‘KPMG advised Lycamobile in November 2016 that we intended to resign as auditors after the completion of the 2016 audits and shared draft resignation documents with Lycamobile management in early April 2017.

‘We delayed issuing the resignation at management's request.

‘Given our clear stated intentions to resign, we were therefore surprised to receive a copy of a proposed shareholder resolution to dismiss us as auditors. As the resolution was subject to approval it was not immediately effective, and KPMG therefore proceeded as planned to resign as Lycamobile's auditors on 24 April 2017.’