As a result, credit rating agency Moody's has placed electrical retailer Dixons on review for a possible downgrade. Moody's said that although Dixons had a robust operating performance, it was worried about the group's stretched financial profile following the recent €368m (£236m) UniEuro acquisition in Italy.

Last week's ruling, effective immediately, changed the status of extended warranty contracts issued by offshore insurance companies so that they no longer meet the 'Exempted Activities Test' (EAT) which allows some types of offshore profit to escape CFC taxation. The contracts for extended warranties are usually between the captive insurer and the UK retail client, so that the UK retailer is not a party to the contract, and until now this has been enough for the usually very profitable warranty contract to obtain EAT exemption.

Dixons estimated the cost at £20m in extra tax, and other hardware retailers will also suffer. Kingfisher, which owns the Comet chain, said its tax bill could rise by between £6m and £8m, while Carphone Warehouse forecast a £2m hit.

PwC said: "Insurance products of this sort are inherently very profitable. The Inland Revenue evidently saw this kind of structure as involving the diversion offshore of profits which arose from a sale of the underlying goods or services by the UK retailer. The Revenue clearly felt that such profits should have been taxable in the UK as they arose, rather than being accumulated tax-free in a "captive insurer". Prior to these changes, such arrangements could only be attacked on transfer pricing grounds."