ITALIAN authorities investigating the England manager Fabio Capello for suspected tax evasion are preparing a demand for him to pay up to £7.5m in arrears, fines and interest.

An inquiry ordered by public prosecutors in Turin has been looking at a complex network of companies including a family trust in Guernsey and a perfume and cosmetics company in Luxembourg, another tax haven.

The investigation focuses on Capello’s alleged failure to declare earnings of £7.5m in 2000-2005. Of that total, more than £3.6m is the severance money paid by his former club AS Roma, and the rest is profits from share transactions.

The Guardia di Finanza, Italy’s tax police, will hand a report to the prosecutors by the end of the month. “Our belief is that setting up companies outside Italy enabled Capello not to declare all his earnings,” a senior investigator said.

A source close to the regional tax authority, which initiated the inquiry, said it planned to seek between £6m and £7.5m from Capello, corresponding to the amount of tax he allegedly failed to pay as well as a fine and interest due.

If Capello, 61, acknowledges he is at fault, he could negotiate a deal to reduce the fine by three-quarters. He would still have to pay arrears of more than £3m.

Capello is the latest celebrity to be scrutinised by the Italian tax authorities, who are also seeking £90m from the motorcycling champion Valentino Rossi on earnings since 2000, the year he moved to London.

The tax police have analysed half a dozen boxes of documents that they seized in July 2007 from Capello’s home in Legnano, near Milan, and the offices of his accountants Severgnini in Milan and his former clubs Juventus and Roma.

An informed source said documents seized at the Rome club showed that the £3.6m it paid Capello in 2004 was sent by bank transfer to a Luxembourg-based company, Sport 3000, described in its balance sheet as trading in perfume goods and cosmetic products and making investments. The sum was apparently not declared to the Italian tax authorities.

Sport 3000 is controlled by the Capello family trust, based in Guernsey, which is almost wholly owned by Capello himself. According to Sport 3000’s balance sheet, the registered brands Fabio Capello and Don Fabio were worth £78,120 in 2005. No such perfumes appear to have gone on general sale.

Also part of Capello’s group of companies is FC 2000, controlled by Sport 3000 and based in Milan, whose 2006 balance sheet lists assets including seven homes – four in Milan, one in Legnano, one on the Sicilian island of Pantelleria and one in Marbella, Spain – with a total value of £1.3m.

Celebrities with holiday homes on Pantelleria include the designer Giorgio Armani and the actress Carole Bouquet, star of Trop Belle pour Toi.

The 2005 balance sheet for Sport 3000 lists a different property portfolio, including a number of homes in Paris, a block of flats and land in Marbella and a flat in Dubai, worth a total £1.6m. Capello’s tax returns show he declared total earnings of £5.6m in 2005 and a total of £15.8m in 2002-2005.

Once the prosecution receives the report from the tax police, it can decide to question Capello before either requesting that he be sent for trial or shelving the investigation.

The offence theoretically carries a jail sentence of up to three years, but Capello would not spend any time in jail as it is covered by an amnesty approved by the centre-left government of Romano Prodi, the former prime minister, in 2006. Capello could still be liable, however, to demands from the taxman.

Alberto Moro Visconti, Capello’s lawyer, said on Friday: “It’s very difficult to make comments in this affair because the tax police have not yet filed their report. We don’t know what conclusions they reach and how. I can only say that we are certain that all the taxes that had to be paid were paid. We have not evaded anything.”

Capello said last month: “With my advisers, I have always endeavoured to conduct my financial business with integrity. I have assured the FA that my finances are in order and that I am not aware of any matters which would be of concern.“

The FA had previously said: “We have spoken to Fabio and his advisers. They have explained the facts. They have also given their assurances that Fabio’s tax payments are in order.” The FA added that none of his salary was being paid into the family trust. Additional reporting: Frances Kennedy

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