Kuwaitis face dollars 600m tax bill

THE Kuwait Investment Office is understood to be close to a dollars 600m (pounds 402m) tax settlement with the Inland Revenue over the KIO's controversial purchase and part-sale of a 22 per cent stake in BP in the late 1980s, writes David Hellier.

Tax accountants from KPMG Peat Marwick, the firm that audits the Kuwait Investment Office and the Kuwait Investment Authority, are dealing with the Revenue on the Kuwaitis' behalf, according to sources.

Last September, the Financial Times alleged that the Kuwait Petroleum Company, rather than the KIO, was the purchaser of the 21.7 per cent stake, a fact hidden from the government in breach of UK company law. The FT further alleged that the Kuwaitis benefited from pounds 600m in tax breaks when they subsequently sold back part of the stake to BP, and on dividend payments.

The credits were allowable to the Kuwaitis because they told the Revenue that the shares were held by the KIO, which receives sovereign tax immunity as an arm of the state of Kuwait.

The Revenue has carried out a formal investigation.

A spokesman for KPMG Peat Marwick said that he did not know how advanced the negotiations were. The Kuwaitis have never admitted liability although they have always taken the allegations seriously.