Al Fayed Loses Landmark Tax Case

by Caroline Maxwell, Tax-News.com, London

06 June 2002

In a statement released last Friday, Scotland's most senior judge, Lord Gill, condemned the UK's Inland Revenue for allowing super-wealthy foreign-domiciled residents to evade taxes.

Ruling on Mohamed Al Fayed's case against the Revenue, Lord Gill judged that the tax authority had been wrong to issue the Harrods boss with a 'forward contract' - whereby he paid a set amount of tax each year and was not required to complete a tax return - in the first place.

'It was little short of a random figure accepted as an alternative to the possibility of there being appropriate arrangements that would avoid any liability to tax at all,' the judge said of the £240,000 annual payment.

In a written statement quoted by the Guardian newspaper this week, Lord Gill went on to criticise the Inland Revenue department for accepting what are essentially payments in return for not doing its job, arguing that the IR had: 'entered into the contract blind and contracted to remain blind'.

Mr Al Fayed launched his legal challenge in 2000, when the Revenue authorities withdrew his forward contract following revelations that his income was far larger than had previously been assumed. However, traditionally such agreements have been very secretive, and the procedures pertaining to them are not included in Revenue manuals

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