David Moulsdale, the millionaire Scottish entrepreneur behind the Optical Express chain, is embroiled in a £10.9m tax dispute with HM Revenue & Customs, the company's latest set of accounts reveal - but he insists the company will press ahead with its global expansion plans.

In an interview with The Herald yesterday, the 38-year-old Glaswegian said his eyecare, dental and spectacles empire would this year expand in the Netherlands and Germany, and that a move into North America was also planned.

DCM Holdings, Moulsdale's Cumbernauld-based parent company, which controls almost 200 outlets in three countries, reported that pre-tax profits for the nine months to December had surged to £8.8m, compared with £128,365 for the year to March 2006.

The company changed its reporting period and a full-year comparison could not be made.

However, those earlier annual figures had been hammered by hefty restructuring charges of £1.7m, as the group absorbed the former Boots's laser eye correction and dental care businesses, which it acquired in early 2005 after the high street retailer signalled its intention to pull out of healthcare services.

Turnover for the nine-month period came in at £108.9m, compared with £113.9m for the year to March 2006.

Sales at the group have been climbing steadily since the acquisition of Health Clinic, a 20-store Newcastle chain that was losing £1.5m a month when Moulsdale bought it out of administration in 2002.

Moulsdale said: "We've seen substantial growth in our earnings and profits over these nine months. We're extremely pleased with the way the business is going and we're very confident about the future.

"We are planing to add to our Netherlands operation and expand the number of laser eye clinics in Germany to 20 by the end of this year.

"The number of laser clinics in the UK will expand from 30 to 50 by the end of the following year. We're also considering opening operations in North America."

Nonetheless, the accounts, which were signed off on March 27 this year, reveal a dispute between DCM and HM Revenue & Customs over the recoverablity of £10.9m worth of VAT.

If the group were to lose the dispute, it would wipe out a substantial chunk of shareholders' funds, which were recorded at £17.1m for the year.

The company's auditors, Baker Tilly, highlighted the issue under the heading "Emphasis of matter - possible outcome of dispute with HM Revenue & Customs".

The auditors said: "The ultimate outcome of the matter cannot presently be determined, and no provision for any irrecoverable VAT that may result has been made in the financial statements."

The accounts describe the issue as a dispute over the "proportion of recoverable input tax between taxable and exempt supplies".

They also state that while a VAT tribunal was "sympathetic to the group's stance" an appeal was refused, and the matter now rests on an appeal to the Court of Session, which is scheduled to be heard in the summer.

"Due to the dispute, HM Revenue & Customs have stopped making any repayments of VAT due to the group," the accounts note.

Asked about the impact on the group, if appeal goes in favour of HM Revenue & Customs, Moulsdale said: "We are confident of winning. Our view is that we are being treated quite differently than our competitors. That is also the view of our counsel.

"If we lose, yes, it will have a negative impact on our shareholders' fund, but it certainly won't affect our plans. If we win it will be cash neutral."

Meanwhile, the accounts also reveal that the salary of the highest-paid director, assumed to be Moulsdale, came in at £187,901 for the period, excluding pension contributions, compared with £250,519 for the year to March 2006.

Moulsdale is also listed as DCM's sole shareholder, and as such, paid himself dividends of £700,000 in the 21 months to December.

The entrepreneur, who has borrowed heavily from Bank of Scotland to finance a string of acquisitions, also said that "the group proposes to continue its growth organically and through acquisition".