Fayed accused of failing to pay tax for 25 years

MOHAMED AL FAYED failed to pay any income tax for 25 years, the jury in the libel trial brought by the former Tory MP, Neil Hamilton, was told yesterday.

The owner of Harrods had not paid any personal income tax between 1964 and 1989 and it was only following an investigation by the Inland Revenue that a sum of pounds 20m was paid, the High Court in London heard. Mr Fayed's record on tax payments came under scrutiny during cross-examination by Mr Hamilton's barrister, Desmond Browne, QC, who pointed out that Mr Fayed had emphasised during the hearing that he was a "huge taxpayer", contributing pounds 118m in taxes.

He suggested that one of the reasons he disliked the late tycoon Tiny Rowland was that he had forced the Inland Revenue to investigate his tax position. Mr Browne put to him that he had been forced to pay pounds 20m in tax arrears.

Mr Al Fayed: "I paid that pounds 20m in agreement with the Inland Revenue."

Mr Browne said: "The reason you had to pay pounds 20m some time in the late 1980s is that for 25 years you had not paid a penny in personal British taxes."

Mr Fayed: "You are wrong."

Mr Browne: "Are you saying that each year you paid personal British income tax? Are you telling the jury that each year for the quarter of a century, between 1964 and 1989, you have paid to the Inland Revenue British personal income tax?"

Mr Al Fayed: "That's right."

Mr Browne: "I suggest that's untrue and that the pounds 20m you agreed you paid to the Revenue in the late 1980s was a settlement with the Revenue for unpaid taxes after Tiny Rowland had forced them to investigate."

The claims came during the fourth day of the libel trial instigated by Mr Hamilton who is suing Mr Fayed over his allegations that the former MPasked questions in the House of Commons beneficial to Harrods and received cash, gifts and a free holiday at the Paris Ritz in return.

During his other evidence, the Egyptian-born businessman mounted a further series of attacks and allegations against establishment figures, prompting the judge to issue a stern warning that he would silence him if he proceeded with his observations about homosexuals in Tony Blair's Cabinet.

Mr Al Fayed had also told the jury that Margaret Thatcher "threw me to the dogs" when she was Prime Minister because she was worried that The Observer, then owned by his business rival Mr Rowland, knew that her son, Mark Thatcher, "had got hundreds of millions of commission from arms deals".

The exchange over gays in the Cabinet came after the jury was told Mr Fayed had called Mr Hamilton a "homosexual prostitute" in a secret videotape of a private lunch with the Lonrho boss, Mr Rowland. Mr Browne accused Mr Fayed of "nothing but vicious invention". The Harrods boss replied: "There is rumours. I just mentioned in a casual discussion ... I think it is true. I have nothing against homosexuals, I employ hundreds of homosexuals ... There are homosexuals, Chris Smith in the Cabinet and the Minister of Agriculture..."

The judge, Mr Justice Morland, interjected: "Mr Al Fayed, if you go on like this I will stop you giving evidence." Mr Fayed said: "I am sorry. I am just supporting my answer."

The case continues.