Details of a new public inquiry into allegations that British soldiers murdered and abused Iraqi civilians are to be revealed.

Defence Secretary Bob Ainsworth is due to announce the chairman and terms of reference for the investigation into the "Battle of Danny Boy" in southern Iraq in 2004.

The inquiry was launched as a result of a High Court legal battle against the Ministry of Defence brought by six Iraqis connected to the incident.

Iraqi families claim that up to 20 people were murdered and mutilated at Camp Abu Naji, a British base, following a firefight between UK soldiers and Iraqi insurgents at a checkpoint known as "Danny Boy" near the town of Majar-al-Kabir in Maysan Province on May 14, 2004.

The Ministry of Defence vigorously denies the allegations and says the 20 who died were killed on the battlefield. A defence source acknowledged that their bodies were badly injured but said the wounds were consistent with the weapons used against them.

It is understood that the new public inquiry's terms of reference do not include investigating allegations that the dead Iraqis' bodies were mutilated by UK troops. Five of the Iraqis who brought the High Court case earlier this year say they are innocent civilians who were ill-treated after being captured by British soldiers after the battle.

The sixth applicant was Khuder Al-Sweady, uncle of 19-year-old Hamid Al-Sweady, one of the 20 who died.

The MoD at first opposed their application for a public inquiry on the basis that the Royal Military Police had already conducted sufficient investigations and concluded the allegations were groundless. But in July the Defence Secretary conceded an inquiry was necessary because of Government failings in disclosing relevant documents to the High Court.

Phil Shiner, from Public Interest Lawyers, who represented the Iraqis in the High Court, said: "These allegations are incredibly serious yet the Government has continuously delayed dealing with them since they were first made in 2004."

An MoD spokesman said: "We have found no credible evidence that those detained as a result of the attack on British troops and prolonged firefight at the Danny Boy checkpoint were mistreated."