Tesco has demanded that the Guardian newspaper make a full retraction and apologise over allegations published this week that it has avoided paying a £1 billion tax charge.

The retailer has also reaffirmed its “categorical denial” of the “false allegations”.

In a strongly worded rebuttal, the retailer demanded an apology from the newspaper for “lying to readers and damaging Tesco’s reputation”. It said that the allegations that Tesco has contrived an offshore tax avoidance structure relating to a programme of property sale and lease backs are “completely wrong”.

The grocer said that the profits are taxable in the UK and are included in Tesco’s UK tax returns, “as are the profits arising from the sale of the 50 per cent of its interest in the stores”.

Tesco added: “The structures adopted by Tesco have no implications for tax, except in relation to stamp duty land tax and stamp duty on the transfer of shares, which are normally borne by the purchaser, not the vendor.

“It is common for property to be held by offshore companies (in this case in the Cayman Islands) because these are attractive to purchasers since no stamp duty is payable on acquisition.”

Tesco’s statement also slammed “misreporting” of the rate of tax it pays, arguing that the discrepancy between the 29 per cent tax its accounts state and the Guardian’s claim that this is nearer 20 per cent was down to the deduction of UK Capital Allowances, capital investment and some timing differences.

Yesterday, MPs and Lords called for a crackdown on tax avoidance in light of the allegations following a six month investigation by the newspaper.