According to the Guardian, which claims to have examined company documents, Tesco has set up a number of companies registered in the Cayman Islands named after different colours, and is using the companies to avoid UK tax on the sale of some its properties.

In a bid to free up capital locked in its extensive property portfolio, Tesco has reportedly sealed two major property sale and lease back deals with British Airways Pension Fund and British Land, worth GBP445 million and GBP650 million respectively. However, the Guardian believes that the company structures that Tesco has established will save it half-a-billion pounds in tax.

The revelations have been condemned by MPs and peers from all political parties, and some have called for tighter anti-avoidance rules on companies.

When contacted by the Guardian regarding its findings, John McFall, a Labour MP and chair of the Treasury select committee, told the paper that the committee would also examine the issue of tax avoidance in a report due to be published on Monday.

Tesco has rejected the Guardian's claims, and Lucy Neville-Rolfe, Tesco's executive director of corporate and legal affairs, told the paper in a statement that it is one of the largest taxpayers in the UK, and its tax affairs are regularly scrutinised by the tax authority.

"We have an open relationship with Her Majesty's Revenue and Customs and meet with them regularly to discuss our tax affairs, including our property and international transactions," Neville-Rolfe reportedly stated.

"Full details have been provided to HMRC in the normal way. While every company seeks to operate as tax efficiently as possible - to do so is our duty to customers and shareholders alike - Tesco pays a great deal of tax. It is one of the UK's largest taxpayers," she added.