Windfall for Phoenix Four

The Phoenix Four - former owners of collapsed car giant MG Rover - are set to become millions of pounds richer after clawing back £16 million from the taxman.

At the same time the Department of Trade & Industry as admitted that its inquiry into the MG Rover collapse was likely to drag on into next year.

So far it has cost £6.9 million - around £12,000 a day since it was launched 18 months ago.

The £16 million VAT windfall is revealed in the accounts for MGR Capital, a company that controlled a book of Rover car leases.

The company is owned by Uberior Investments, part of the Halifax Bank of Scotland (HBOS) banking giant, but the Phoenix Four - John Towers, Peter Beale, John Edwards and Nick Stephenson - own 49 per cent.

In the same year that Longbridge closed with the loss of 6,000 jobs a change in the VAT rules covering car hire and leasing businesses meant MGR won back £16.2 million in VAT from HM Customs & Excise.

As a result, profits at MGR rocketed to £17.3 million for the 12 months to December 31, 2005, compared with £546,000 the year before.

The accounts show MGR had retained profits of £22 million at the end of 2005. As the leasing and hire agreements run out, the company will be wound up and the money divided between the Phoenix Four, HBOS and any other creditors.

Because the company is owned by HBOS the money was not available to help bail out MG Rover.

A spokesman for Phoenix Venture Holdings - the company owned by the four former Rover directors - said MGR mostly handled the hire and lease of Rover vehicles to fleet operators.

The arrangements lasted three to five years and the firm would be wound up when the last agreement ended. All car hire and lease companies benefited from the change in the VAT rules the same as MGR Capital.

By Business Editor Jim Walsh