Inland Revenue's Offshore Deal Sparks Massive Compensation Claim

by Jason Gorringe, Tax-News.com, London

11 March 2003

The furore over the Inland Revenue's property deal with Bermuda-based Mapeley Steps is unlikely to die down any time soon, according to an Independent report.

The newspaper revealed on Sunday that the company, which is 42% owned by George Soros, is preparing a £210 million compensation claim against the UK government, and will be asking for £10 million upfront, followed by £10 million payouts each year for the duration of its contract with the tax agency. According to the Independent:

'Mapeley believes that the information the Inland Revenue provided when the deal was struck was inaccurate and incomplete. The claim is to cover the extra work it is now expected to carry out. The property deal...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.'

The Inland Revenue has come under fire from all directions since the deal was completed in March 2001. Critics, including the Treasury Select Committee, which recently released a report on the issue, have argued that the Revenue acted hypocritically in dealing with a company actively employing tax minimisation techniques to its advantage, whilst taking a strong stance on the tax avoidance activities of other organisations and businesses.

The Independent suggested that this new revelation is likely to lead to new calls for the resignation of IR chairman, Sir Nicholas Montagu, whose handling of the affair has come in for criticism. However, a spokesman for the tax department refused to comment at the weekend, telling the newspaper that:

'Discussions with Mapeley are still ongoing 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.'

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