The local media publisher addressed shareholders in a letter that said the board had decided "not to recommend a final dividend payment for 2012" and to halt all further payouts until the outcome of the tax dispute is clear.
An Archant spokesman said: "The potential tax bill arises as a result of a disputed interpretation of the tax treatment of certain charges dating back to 2003. A similar case by another company was lost following a tax tribunal at the end of last year.
"No two cases are identical though and there are significant factual differences which indicate Archant’s position to be strong. There is likely to be further litigation before this matter is fully resolved.
"Archant has always paid its taxes as and when they fall due," he added.
A letter to shareholders regarding Archant's preliminary 2012 financial results stated that the board was confident that it could pay the fines should the outcome of the trial oblige them to, but added that it would increase the total debts of the company and "substantially reduce our bank covenant cover".
Operating profit suffered a 39.5% drop year-on-year to £6.3m in 2012 (2011: £10.4m) on £131.4m turnover, which decreased by 2.7% in the same period (2011: £135.1m).
Operating costs, which increased by 0.4% to £125.1m in 2012 (2011: £124.6m), were attributed to absorbing the "increasing" cost of print outsourced to its contract printer Newsfax. The printer went into administration in September 2012, at which point Archant brought some of its publications to its in-house facility Archant Print, but a number of its titles remain at Newsfax’s Bow site, which was taken over by FT.
Sales force personnel growth and training and "investment in business development" also contributed to the operating costs. Revenues from online activities grew to £6.4m and experienced 15% growth in the second half, following the introduction of new digital teams in each of Archant’s business unit as part of its strategy to grow its online audience.
Archant chairman Richard Jewson said: "Archant has had a challenging year, but has remained profitable and cash generative, whilst making real progress in strengthening its traditional products and in generating increased revenues from digital media. These show through in a satisfactory start to the current year."
