The British government has been criticised for not giving tax collected from frozen Libyan assets to victims of IRA attacks.
Tax collected on £12 billion of assets seized after the collapse of Muammar Qaddafi’s regime could be used to compensate victims of Semtex bombings carried out by the Irish terror group.
The Libyan dictator supplied Semtex to the Provisional IRA in the mid-1980s, which led to a number of deadly bombings.
MPs claim that the government has been levying significant amounts of tax on the assets, citing “a chain of revealing correspondence” between the Foreign Office, the Treasury and the UK tax authority – HMRC.
A UN sanction in 2011 ordered Libyan-held cash, property and securities across the world to be frozen to prevent their theft or misuse during the civil war that overthrew Colonel Qaddafi.
The government has yet to officially acknowledge whether it has been collecting tax on the assets but MPs say that several licences have been issued to make funds from the assets available. No details have been released to explain what or to whom the licences were issued.
The Northern Ireland Affairs Committee, which published a report on compensation for victims of IRA Semtex attacks, is recommending the government enter direct negotiations with Libyan authorities to seek compensation.
The committee said that "continued inaction" on the part of the government had led to many victims, such as those affected by the 1996 Docklands bombing in London, not receiving any compensation from Libya.
"My committee is disappointed our government has been less successful in securing compensation for UK victims of (Muammar) Gaddafi-sponsored IRA Semtex attacks than other governments have been for their nationals," Chairman Dr Andrew Murrison said in the report.
"We now find that HMRC may have been scooping up big tax receipts from frozen Libyan assets, a small part of which could help victims pending reparations being negotiated with the Libyan government."
The report added that the government had been “opaque” about how much tax had been collected.
The committee have demanded an explanation as to why the government has chosen not to finance a victims' reparations fund if tax is being collected.
Responding to the report, the government said it took the issue “extremely seriously” and wanted to find a just solution for victims of Libyan-sponsored IRA terrorism.
"In accordance with international law, when assets are frozen, they continue to belong to the sanctioned individual or entity. Sanctions can only be lifted by the EU or UN,” the spokesperson said in a statement.
"We do not comment on individuals' tax affairs. Generally, where taxable income or gains are made in relation to frozen assets, a tax liability will arise, regardless of the assets' frozen status."