Oxfordshire-based electrical retailer Powerhouse could be hit with extra taxes totalling millions of pounds, due to a move by Chancellor Gordon Brown.

His pre-Budget report included changes to controlled foreign company legislation, with profits from the sale of extended warranties to be brought within the scope of UK taxation.

A loophole currently allows companies to channel profits through offshore havens, meaning the levels of tax are much lower.

The announcement led to shares in Dixons, Kingfisher -- which is the parent group of electrical chain Comet -- and Carphone Warehouse dropping sharply.

A spokesman for Powerhouse, which has its headquarters in Bicester and has more than 230 stores across the UK, said the company was watching the situation.

However, he was not prepared to reveal any exact details of the potential impact on the business.

In July, it revealed pre-tax profits rose 140 per cent to £6m, following its acquisition of 98 former ScottishPower stores last autumn.

Turnover also grew by 67 per cent to £319m.

Dixons was the hardest hit under the new rulings.

It warned its tax bill could increase by about £20m a year. Mobile phone group Carphone Warehouse would not suffer as much as Dixons or Kingfisher, but its tax bill is still likely to increase by £2m in the year to March 2004.

The Competition Commission is already looking into extended warranties, which generate substantial revenues for electrical retailers.

Concerns include aggressive sales tactics and high prices.