MI5 is facing allegations it was complicit in the sexual abuse of children, the high court in Northern Ireland will hear on Tuesday.

Victims of the abuse are taking legal action to force a full independent inquiry with the power to compel witnesses to testify and the security service to hand over documents.

The case, in Belfast, is the first in court over the alleged cover-up of British state involvement at the Kincora children’s home in Northern Ireland in the 1970s. It is also the first of the recent sex abuse cases allegedly tying in the British state directly. Victims allege that the cover-up over Kincora has lasted decades.

The victims want the claims of state collusion investigated by an inquiry with full powers, such as the one set up into other sex abuse scandals chaired by the New Zealand judge Lowell Goddard.

Amnesty International branded Kincora “one of the biggest scandals of our age” and backed the victims’ calls for an inquiry with full powers: “There are longstanding claims that MI5 blocked one or more police investigations into Kincora in the 1970s in order to protect its own intelligence-gathering operation, a terrible indictment which raises the spectre of countless vulnerable boys having faced further years of brutal abuse.

“It’s only Justice Goddard’s inquiry that will be able to ensure that evidence doesn’t remain hidden in Whitehall filing cabinets and that even senior politicians will have to attend the inquiry.”

Children are alleged to have suffered sustained sexual abuse after being taken from the east Belfast children’s home, run by a member of a Protestant paramilitary organisation, to be offered to men.

Lawyers for the victims will argue in court that “there is credible evidence (and it is therefore arguable) that the security forces and security services were aware of the abuse, permitted it to continue and colluded in protecting the individuals involved from investigation or prosecution”, according to papers lodged with the Belfast high court.

One alleged victim, Gary Hoy, said in a sworn affidavit seen by the Guardian: “If we had had a proper inquiry in the 1980s then I wouldn’t have to relive this again today. MI5 and MI6 cannot be allowed to hide things, and I believe everything needs to be brought out into the open. I find it heart-wrenching that there were security men could have been behind the abuse or involved in it … Because they were in positions of authority or supposed to be protecting the state they get away with it.”

Hoy was placed in Kincora with his younger brother in the 1970s. He says the abuse left him broken as an adult.

At the court case this week, lawyers for Hoy will state that “he (and other individuals) suffered abuse whilst in the care of Kincora boys’ home which would come within the definition of torture, or inhuman or degrading treatment as defined under article 3 of the ECHR [European convention on human rights]”.

Two former British military officials say a full inquiry with proper powers should take place. One says MI5 was complicit in the abuses; another says he reported it to MI5 but no action was taken.

Colin Wallace, a former army information officer in Northern Ireland, said: “There is now irrefutable evidence that previous inquiries were deliberately engineered or manipulated to mislead parliament by concealing the role of government agencies in covering up the abuses.”

The demand for an inquiry with full powers was supported last week by parliament’s home affairs committee.

The government wants the allegations covered by a different inquiry which lacks the powers to compel MI5 to hand over documents and cannot compel witnesses to testify. The government’s preferred option will not fund lawyers for the victims.

Three men were jailed for their part in abuse at Kincora in 1981, but attempts to establish the truth about British state involvement have been blocked. It has persistently been alleged that William McGrath, Kincora’s housemaster and the leader of an extreme evangelical Protestant group called Tara, was an informant for British intelligence. McGrath was jailed for sexual offences in 1981 and is now dead.

There have been limited inquiries into Kincora, but officers of the former Royal Ulster Constabulary, army intelligence officers, a former Northern Ireland ombudsman, and the judges conducting those earlier inquiries all said the truth about what went on there – and why it was allowed to continue for so many years – had been suppressed.

RUC officers were repeatedly refused permission in the 1980s to interview a senior MI5 official about the affair.

The Home Office, the government department responsible for MI5, declined to say if any intelligence official had ever even been questioned about the claims. It also declined to confirm or deny if the allegations of MI5 complicity in the abuse of children were true or a maligning of the security service’s reputation.

A Home Office spokesperson said: “The government is cooperating fully with all investigations into allegations relating to the Kincora boys’ home. It is not appropriate to comment further while these investigations are under way.”

In his affidavit, Hoy said: “Joe Mains, who was jailed for offences in the 1980s, he had a room in a [portable building]. His door was always closed, and I remember well-dressed men used to go in with children and the door was locked. Joe Mains took me to a house in Four Winds and abused me, and a man called Semple [also convicted] took me to a house in the Fortwilliam area and abused me.”

Lawyers acting for Hoy and other alleged victims want judges to declare the government’s planned inquiry is inadequate. They are seeking leave to judicially review the government’s decision.

The allegations of security service complicity in the abuses at Kincora have been reported by news organisations in Northern Ireland and the Irish Republic for decades.

Kevin Winters, the solicitor for Hoy and other victims of Kincora, said they viewed the government’s proposed inquiry as offering little hope of delivering the justice they had waited so long for: “They see this as a continuation of the cover-up that has existed for decades. They deserve full closure and justice.”

The allegations of British state complicity in the abuse of children initially appeared to be a conspiracy theory. But detectives who investigated Kincora in the 1980s said at least one Tory MP visited the home at the time boys were being sexually abused there. Brian Gemmell, a former army intelligence officer, has said he was warned off his investigations into Kincora by an MI5 officer.

Among the first to accuse the Ministry of Defence and MI5 of a cover-up was the former army information officer Wallace, who was himself the victim of dirty tricks, and subsequently left the MoD.

In 1980, as more people began to take notice of his claims about Kincora, Wallace was arrested and convicted of manslaughter. He spent six years in jail amid suggestions he had been framed. His conviction for manslaughter was quashed in 1996 in the light of fresh forensic evidence and shortcomings at his trial. In 1990, Margaret Thatcher was forced to admit that her government had deceived parliament and the public about Wallace’s role.

An independent investigation by David Calcutt QC had found that members of MI5 had interfered with disciplinary proceedings against Wallace. As a result, Wallace was awarded £30,000 compensation.

He told the Guardian: “Surely some action must be taken against those whose actions deliberately perpetuated the cover-up of the abuses and thus prolonged the suffering of the victims unnecessarily.”

The chair of the current inquiry, Sir Anthony Hart, has asked all UK government departments and agencies to provide him with every file they held on Kincora. A spokesperson for the inquiry declined to elaborate when asked what response Hart had made to his demand.

However, Theresa May, the home secretary, has told Hart and the Northern Ireland secretary, Theresa Villiers, that “all officials, government departments and agencies will give their fullest cooperation”. This, she added in a letter seen by the Guardian, “includes the security service [MI5] and the Ministry of Defence”. May said that if necessary she would place the Kincora allegations into the hands of the England and Wales child sexual abuse panel inquiry under Judge Goddard.