Times (London) May 12, 2004 Al Fayed to face tax investigation after court defeat By Richard Ford, Home Correspondent
TAX inspectors won the right yesterday to launch a major investigation into the financial affairs of Mohamed Al Fayed, the owner of Harrods.
A judge rejected claims that the proposed investigation was an abuse of power and part of a political vendetta against the store boss.
Lord Reed said: "The ability of the Revenue to carry out effective investigation of suspected tax evasion or tax avoidance is a matter of public importance."
In a ruling at the Court of Session in Edinburgh, Lord Reed rejected Mr Al Fayed's challenge to the taxman's decision to look into his tax affairs. He said: "As in respect of tax evasion, effective investigation of tax avoidance is essential in the public interest and to ensure fairness as between tax payers."
The judge said: "Mr Fayed works as a director of major companies but does not appear to be paid a salary. He lives in expensive accommodation, but he does not appear to own or rent it." Flats in Park Lane, London, belonged to an offshore company, which rented them to a British firm and the rent was paid by another offshore company.
The judge said that a broadly similar situation existed over Balnagowan Castle in Easter Ross, the Highland estate of Mr Al Fayed.
"The private aircraft, the yachts, the horses, the domestic staff and other trappings of wealth are similarly provided by a variety of companies, most of which are located offshore, in such jurisdictions as Liechtenstein and Jersey," Lord Reed said.
He said: "The natural inference from the evidence is that a great deal of effort and ingenuity has gone into creating networks of offshore companies, trusts and other entities in order to minimise liability to tax." Lord Reed added that a taxpayer who chose to receive accommodation and other benefits by not paying for them directly, as most ordinary citizens did, could not in principle complain if the Inland Revenue wanted to make more wider-ranging inquiries than would be usual.
The judge said: "In the face of such opaque and sophisticated arrangements, it is important that the Revenue should be able to ensure that UK tax liabilities are accurately assessed and accounted for.
"The ordinary taxpayer is entitled to expect that the Revenue will exercise its powers when necessary to obtain any information that it reasonably requires for that purpose."