Revenue defends tax deal with Fayeds

The Inland Revenue yesterday hit back at criticism from MPs over a secretive unit of élite tax inspectors nicknamed the Ghostbusters who are involved in tracing the complex tax affairs of some of the world's wealthiest foreign businessmen who have interests in the UK.

The Special Compliance Office (SCO) came under scrutiny in a BBC TV Money Programme report that revealed details of special tax agreements signed with Mohamed Al Fayed, the Egyptian owner of Harrods.

The programme, broadcast on Thursday, included extended interviews with Mr Fayed in which he discussed his personal tax affairs and the so-called "forward tax agreements" which he had signed with the SCO.

But the agreements prompted an angry response from MPs who believe the Inland Revenue may have handed Mr Fayed, and other wealthy businessmen, preferential tax arrangements.

Gerry Steinberg, a Labour MP and member of the Public Accounts Committee, said he would be calling on the National Audit Office to investigate the Inland Revenue's use of the SCO. The programme raised questions as to the SCO's competence in dealing with the complex tax affairs of the very wealthy.

A statement issued by the Inland Revenue said: "Our Special Compliance Office identifies and investigates the most significant cases of tax fraud and evasion against the honest British taxpayer. Its activities regularly bring in around £400m per year, which is money that would not otherwise have come to the Exchequer. "The SCO has an exemplary record both in terms of propriety and its investigative skills with an excellent record of pursuing tax cheats."

This is not the first time that the SCO has been embroiled in controversy. In 1997 the unit's former head, Stephen Allcock, was jailed for four years after being convicted of corruption charges. A Scottish judge recently found that in agreeing forward tax agreements with Mr Fayed, the SCO had acted beyond its powers and scrapped the deals which the Inland Revenue had already tried to rescind, a move Mr Fayed opposed. Mr Fayed said he had been forced to leave the UK since the scrapping of the agreements and live as a tax exile in Switzerland.