Capello 'told the FA about tax probe'

The FA moved quickly to play down the seriousness of the situation, insisting they were aware of possible developments prior to appointing the 61-year-old in December.

Capello also issued a statement, assuring his employers and the English public that his "finances are in order".

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But the matter remains uncomfortable for the FA when a Turin prosecutor talks in terms of 'jail sentences' and and an alleged failure to declare 'two million euros'.

In a further twist, Italy's customs department last night alleged that the sum Capello failed to declare could be as high as £7.5million. Something like this, the FA will argue, was inevitable given that Capello was Juventus manager in a period at the centre of the corruption scandal that has rocked Italian football.

As Marco Gianoglio, the Turin prosecutor, tried to explain: "This all started a year ago when we had information from the fiscal authorities who were looking into the Juventus affair. They informed us of these offshore companies used by Capello and we asked for the paperwork.

"In essence we are talking about earnings of around two million euros that were not declared and on which 45 per cent in tax should have been paid.

"The investigation is ongoing and we hope to have it closed by the summer. But from the paperwork we have it is possible it could go to court.

"If it did come to court we are talking about an offence at the lower end of the scale, which would be covered by the (prison) amnesty that is in place in Italy at the moment.

"Capello could face three years in jail but as sentences of three years and under are not enforced because of the amnesty, he would not go to jail."

Gianoglio said Capello was "informed of the investigation in the summer", adding that they had not yet spoken to him.

Capello was in charge at Juventus between 2004 and 2006, guiding them to the Serie A title, but the club were demoted to Serie B in 2006 after the match-fixing scandal involving bribes to referees was uncovered.

According to Il Giornale, the respected newspaper, prosecutors and financial investigators are looking at a complex web of offshore companies set up for Capello by his sons Pierfilippo and Edoardo.

"It all rests on overseas companies through which payments were passed from sponsorship deals," said Gianoglio.

"Capello does not need to surrender his passport. Should we need to speak to him we can arrange it around his job as England manager."

The investigation is being led by Turin public prosecutor Raffaele Guariniello and has been conducted in "great secrecy" for several months. Guariniello led the investigation into allegations of doping at Juventus in the 1990s.

Il Giornale said the authorities were looking at payments to Capello through the Capello Family Trust, which is registered in Guernsey. This is apparently linked to another company, Sport 3000, which is based in Luxembourg and has money invested in Ireland as well as properties in Milan, Marbella and the Italian island of Pantelleria.

The newspaper said the probe had been launched after close scrutiny of the Juventus accounts during the match-fixing scandal.

This is not the first time Capello has been at the centre of a prosecution. In 2003 he plea bargained and was given a £3,000 fine after it emerged he had signed a false residency declaration.

He claimed to be a resident of the fiscal paradise Campione D'Italiain Switzerland, but during the hearing admitted he could not even recall the address.

His co-accused, Roberto Salmoiraghi, was sentenced to six months in jail.

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

"I understand that these inquiries in Italy are part of a wider investigation into the finances of many highprofile individuals."

An FA spokesman added: "We have spoken to Fabio and his advisers about today's newspaper reports and they have explained the facts. They have also given us their assurances that Fabio Capello's tax payments are in order."

According to sources in Italy, the investigation is unlikely to trouble Capello. Yesterday his Milan-based lawyer, Alberto Moro Visconti, said: "We are talking about normal commercial operations that have no fiscal return. We are sure this will be clarified soon."

Capello's son Pierfilippo, who is also a lawyer, said: "It's not really an investigation. It's just a check of his financial affairs.

"In Italy this sort of thing happens all the time and the only reason this is news is because my father is the new England boss and he is high profile. We have known about this action for a while. It is all part of the ongoing investigation at Juventus and has nothing to do with my father."

The FA, meanwhile, will ask England's players to wear black armbands against Switzerland on February 6 to mark the 50th anniversary of Manchester United's Munich air disaster.