In a statement, Tesco said the overstatement was principally due to the accelerated recognition of commercial income and delayed accrual of costs.
“On the basis of preliminary investigations into the UK food business, the board believes that the guidance issued on 29 August 2014 for the group profits for the six months to 23 August 2014 was overstated by an estimated £250 million,” the statement read.
“Some of this impact includes in-year timing differences. Work is ongoing to establish the extent of these issues and what impact they will have on the full year.”
Deloitte has been called in to undertake an independent and comprehensive review of the issues.
Dave Lewis, Tesco group chief executive said the company has uncovered a serious issue but has responded accordingly.
“The chairman and I have acted quickly to establish a comprehensive independent investigation.
“The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear," Mr Lewis said.
The BBC is reporting four executives have been suspended in response to the errors.
The announcement pushed Tesco’s share price down 11.6 per cent.
Tesco said it will provide a further update when releasing interim results, which will now be announced on 23 October 2014.