MPs have urged the Chancellor to reveal whether the Government is collecting taxes on frozen Libyan assets.
Members of the Northern Ireland Affairs Committee have demanded clarity after a Foreign Office minister told them the estimated £12 billion worth of assets are not exempt from tax.
Committee members have demanded to know why, if tax is being collected, it has not been used to compensate victims of IRA bombs created with Libyan Semtex.
Those bereaved and injured by the attacks have long been pressing for Government support for their bid for compensation paid out of the millions seized from the toppled Gaddafi regime.
Dictator Muammar Gaddafi armed the IRA with the powerful plastic explosive used in atrocities such as the bombing of Harrods in 1983, the Remembrance Day ceremony in Enniskillen in 1987, Warrington in 1993, and London’s Docklands in 1996.
Committee members have sought clarity from Philip Hammond after receiving a letter from Minister of State for the Middle East and North Africa, Alistair Burt.
The committee had asked Mr Burt whether the assets were subject to UK tax liability and whether the Treasury has ever released funds or the interest or dividends from these assets.
In his letter, Mr Burt said that “designated persons are not exempt from tax as a consequence of having their assets frozen”.
Chairman of the Northern Ireland Affairs Committee, Dr Andrew Murrison, said Mr Hammond needed to provide concrete answers on the status of the assets.
“The Government said it would take a ‘visibly proactive’ approach to securing compensation for victims of IRA Semtex attacks,” he said.
“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.”
A spokeswoman for the Treasury said: “We recognise the importance of this issue and will respond to the Committee in due course.
“The UK Government does not hold or move money frozen as a result of sanctions. This responsibility rests solely with the financial institutions holding them, and sanctions can only be lifted by the EU or UN.
“There is no lawful basis in sanctions legislation on which the UK could seize or change the ownership of any Libyan assets.”