Britain's tax collectors have come under fire from MPs over the sale of 600 of the agency's properties to a Bermuda-based company, thus saving the company's owners millions of pounds in UK taxes.

The Treasury select committee said in a report into the sale that they were "astonished and extremely concerned" about the actions of Inland Revenue officials. Two years ago the Inland Revenue agreed to sell and then lease back its properties in a 20-year private finance initiative (PFI) deal worth ?220 million.

At the time the Inland Revenue claimed to have sold the properties to a British firm called Mapeley, but later admitted it had actually sold them to a Bermuda-based sister company Mapeley Steps.

The BBC said yesterday that the report found officials repeatedly failed to keep the Revenue's board informed and said Minister Dawn Primarolo was entitled to feel "deeply disappointed with the service she received". Mapeley will save millions of pounds in tax over the life of the contract. "We consider these to have been serious lapses, well below the standards expected, by all the officials concerned," Michael Fallon MP, chairman of the committee said. Late last year, the Inland Revenue's chairman Sir Nicholas Montague was forced to apologise for the way the contract was handled and for failing to keep ministers informed. No recommendations were made about whether he should be dismissed.

The report clears Mapeley of illegally avoiding tax.

"We accept both that Mapeley was entitled to minimise its tax liabilities and the evidence that the avoidance of tax in this case was legal," the report said. The BBC said the committee was told that even if the properties had been sold to a British company, the contract would not have prevented them from being transferred off-shore. The report recommended that the exclusion of bidders from offshore havens needed to be clarified and that adjustments should be made to recoup lost tax revenues in future contracts.