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Committee writes to Chancellor to seek clarity on taxation of frozen Libyan assets

21 December 2018

The Northern Ireland Affairs Committee, which has been urging the Government to seek compensation for victims of IRA Semtex attacks, presses Chancellor on whether Government is collecting tax on frozen Libyan assets.

A letter received by the Northern Ireland Affairs Committee from Minister Alastair Burt MP, does not say if the UK Government is collecting tax on frozen Libyan assets. If it is, there would be questions around why it would benefit from tax receipts whilst not paying compensation to victims of IRA attacks fuelled by Semtex and weapons supplied by the Gaddafi regime.

Following questions from the Committee on the financial arrangements for the frozen Libyan assets, the Minister's response states that frozen Libyan assets are not exempt from tax. Frozen under UN sanction in 2011, the Libyan assets are now worth approximately £12 billion. As yet, victims of IRA attacks that used Gaddafi supplied Semtex, such as the 1996 Docklands bombing, have not received compensation from Libya.

Status of frozen assets

In May 2017, the former Northern Ireland Affairs Committee published a report on the Government's support for UK victims of IRA attacks that used Gaddafi-supplied Semtex which highlighted a series of missed opportunities to secure compensation for victims. The Committee deemed the Government's response to the report "unacceptable". In a recent evidence session with Minister of State for the Middle East and North Africa, Alastair Burt, the Committee questioned whether frozen Libyan assets were subject to UK tax liability and whether HM Treasury has ever released funds or the interest or dividends from these assets.

The letter noted that "HM Treasury may grant permission for frozen funds to be released" but did not answer the crucial question of whether HM Treasury has in fact issued licenses for funds or interest accrued from the frozen Libyan assets to be released. The letter responded to the Committee's questions on the UK tax liability of the Libyan assets by stating that "designated persons are not exempt from tax as a consequence of having their assets frozen".

The Committee has now written to Chancellor of the Exchequer, Philip Hammond, to get concrete answers on the status of the frozen Libyan assets.

Chair's comments

Chair of the Committee, Dr Andrew Murrison MP, said:

"The Government said it would take a 'visibly proactive' approach to securing compensation for victims of IRA Semtex attacks. We welcome that, but this letter prompts more questions than it gives answers.

It is inconceivable that the Government could profit from frozen Libyan assets but not use receipts to compensate victims. Compensation is needed now. My Committee is pressing the Chancellor to tell us whether the Government has been collecting tax on the assets and related transactions and whether any funds or interest from the assets have been released."

 Further information

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