TaxPersonal TaxAl Fayed: Simply in the red

Al Fayed: Simply in the red

Being labelled more annoying than flame-haired crooner Mick Hucknall is quite some feat. But this is exactly what happened to Mohamed Al Fayed on the popular lifestyle website dogbomb.co.uk. And I am sure the Inland Revenue would agree.

Last week he was fighting his corner at the Edinburgh Court of Session – the highest court in Scotland – trying to convince the judge that previous deals with the Revenue should stand.

Those deals were thrown out by Scotland’s second most senior judge Lord Gill, in May last year, who said at the time that the Al Fayeds had become ‘a privileged group who are not so much taxed by law as untaxed by agreement’.

Under the 1997 agreement, Al Fayed had promised the Revenue £240,000 a year in tax for five years. It was accepted in order to avoid complex and expensive investigations into his overseas earnings.

But following the Neil Hamilton libel trial in 1999, the agreement was torn up and Al Fayed sought a judicial review. It was this that brought Al Fayed back to the courts on Thursday and Friday last week.

The case is interesting, to say the least, and will bring arguments concerning the government’s treatment of non-domicile residents to the fore again.

Should wealthy foreigners be treated differently to UK citizens just because they contribute more to the economy?

The argument for maintaining the controversial non-domicile rules is well documented. Its supporters claim that in the long-term the UK Treasury will lose out because foreign residents will take their business interests elsewhere.

But, while we want – and need – business people to invest in the UK, it is grossly unfair to let them off their own tax liability hook for this reason alone.

Blackmail is a dirty word, but is one that’s not far off non-domicile threats to up-sticks and leave the country should their tax concessions be taken away from them.

And while it is not for me to speculate whether Al Fayed is more annoying than Hucknall – although for the record I find this extremely unlikely – what certainly would be is if the government decides to stick with a system that charges me a higher effective rate of tax simply because I earn less and have less complex tax affairs.

  • David Rae edits Accountancy Age’s Tax page.

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