Inland Revenue Scraps Forward Contracts

by Robin Pilgrim, LawAndTax-News.com, London

01 April 2003

In a statement released last week, Egyptian-born Mohamed Al Fayed, owner of London's celebrated Harrods store announced that he is moving to Switzerland as a result of the abolition of a tax break in the UK designed to benefit the super-wealthy.

Following a judicial review of the Harrods boss's 'forward contract' deal with the Inland Revenue last summer - whereby he undertook to pay the tax authority £240,000 per year, and in return was not required to submit a tax return, or give details of his earnings - Scotland's most senior judge, Lord Gill, condemned the UK's Inland Revenue for allowing super-wealthy foreign-domiciled residents to evade taxes, and observed of the £240,000 payment that:

'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.'

According to reports, the Inland Revenue has since refused to renew a further five such contracts with wealthy individuals.

In a statement released on Friday, Mr Al Fayed announced that:

'I am leaving with a heavy heart, because this is a country where I have lived for over 35 years and which I have come to love very deeply.' However, he continued:

'The recently grossly unfair treatment at the hands of the Inland Revenue finally convinced me that, for the sake of my family, the time has come to leave. As a result of this I will naturally be spending a little less time physically in the British businesses but I will continue to play an active role.'

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