MG ROVER’S auditors, Deloitte & Touche, are expected to be investigated amid concern over possible tax avoidance at the collapsed carmaker, The Times has learnt.

A division of the Financial Reporting Council (FRC) — the body that investigated MG Rover’s accounts for the Department of Trade and Industry — is likely to launch an inquiry into Deloitte, which has audited all MG Rover’s accounts.

The Accountancy Investigation and Discipline Board (AIDB) is thought to be concerned about tax avoidance across MG Rover’s highly complex corporate structure and about fees paid to Deloitte for additional services.

The FRC expressed concerns over MG Rover’s accounts in its report to the DTI that led Alan Johnson, the Trade and Industry Secretary, to mount an independent investigation. Tax avoidance is believed to be high among those concerns.

Deloitte received a number of payments for services additional to auditing from MG Rover. In 2002 it was paid a total of £3.5 million on top of its £500,000 audit fees. In the last set of published accounts, for the year to the end of 2003, the directors said they had dispensed with the obligation to reappoint auditors annually and that Deloitte should be deemed to be reappointed for a further term.

The AIDB has the power to reprimand or impose an unlimited fine if it uncovers wrongdoing.

The expectation of an investigation follows comments by the carmaker’s administrators last week that MG Rover had been advised several times shortly before its collapse by financial and legal advisers that it was fit to keep trading. PricewaterhouseCoopers made the remarks following concern from creditors that the company traded while insolvent.

Paul Boyle, chief executive of the FRC, said: “We are monitoring developments and an inquiry is a possibility.”

A spokeswoman for Deloitte said: “We are satisfied with the opinions given in the financial statements and would fully assist with any inquiry.”

Meanwhile there is mounting political pressure for an investigation into the Government’s role in the original takeover of MG Rover five years ago. The DTI’s inquiry will not cover that and will focus instead on the behaviour of the directors and on trading.

Norman Lamb, the Liberal Democrats’ trade and industry spokesman, said: “It seems clear that the inquiry will not be as wide-ranging as it needs to be. It is essential an inquiry looks at the conduct of the Government.”

Mr Lamb is pressing the National Audit Office to conduct an investigation.

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