Taxman will face extra £210m bill on offshore deal

Mapeley, the company that sparked a huge Whitehall row by buying 600 Inland Revenue properties and then dodging tax by registering them offshore, is preparing a £210m compensation claim against the Government.

The revelation comes after the Treasury Select Committee reported last month that it was "astonished and extremely concerned by serious lapses in the standards required from officials" in negotiating the deal. It is likely to lead to fresh calls for the resignation of Inland Revenue chairman Sir Nicholas Montagu.

Mapeley, which is 42 per cent owned by billionaire currency speculator George Soros, is understood to be weeks from submitting the £210m claim. This is just £10m less than the price it paid for the portfolio of Inland Revenue properties in March 2001.

Mapeley refused to comment. But it is understood to be asking for a £10m upfront payment and around £10m every year for the next 20 years.

Mapeley believes that the information the Inland Revenue provided when the deal was struck was inaccurate and incomplete. The claim is to cover extra work it is now expected to carry out. The property deal, codenamed Steps, saw Mapeley buy the properties and lease them back to the Inland Revenue. On top of this, Mapeley agreed to manage the estate on a 20-year contract.

A spokesman for the Inland Revenue said: "Discussions with Mapeley are still on-going and I cannot disclose the details. Mapeley is claiming that issues have arisen which it was not fully aware of when the contract was drawn up."

Steps was the second major Labour Government property outsourcing deal, following a similar-sized project between the Department for Social Security (DSS) and Trillium, now owned by Land Securities, in 1998

The National Audit Office gave the DSS deal a clean bill of health. A spokesman for the office confirmed that an investigation had begun into Steps, and a report will be published late this year. But unlike the DSS project, Steps is already mired in controversy.

The Treasury Select Committee report was highly critical of the Inland Revenue for selling the properties to a Bermuda-registered company. It found that despite a campaign to crack down on tax avoidance, Mapeley had deliberately sought to minimise its exposure to capital gains tax.

This was discovered by the Inland Revenue, says the report, "only days before the contract was due to be signed".

To make matters worse, the committee found that ministers were kept in the dark about the nature of the deal.

Then, seven months after the deal was signed, Mapeley hit financial difficulties and the Inland Revenue was forced to write so-called "letters of comfort" to the company to help safeguard its banking facilities.

Again, ministers were not informed and the Treasury Select Committee commented that that this "cast doubts" on Mapeley's original bid.

Mapeley won the competition after a year-long contest. Mapeley's accounts show that it spent £16.5m on the bid.