Out-Law News 1 min. read

Goldman Sachs settlement puts pressure on HMRC’s private deals with big business, expert says


Allegations that the UK's most senior tax official "did not tell MPs about his role in a settlement arrangement worth up to £10 million could indicate that big businesses are still "doing deals in private" with HM Revenue and Customs (HMRC), a tax law expert has said.

HMRC has been accused of forgiving Goldman Sachs for millions of pounds of tax due on remuneration and bonus payments made to bankers through an offshore company in the British Virgin Islands, according to the Guardian.

HMRC's Dave Hartnett appeared before a Parliamentary select committee yesterday to answer allegations that he had misled MPs about his involvement in the so-called 'sweetheart' settlement with the investment bank which related to an offshore tax loophole.

Goldman Sachs had refused to settle its tax debt when the Government closed the tax loophole relating to offshore employee benefit trusts because HMRC had made a technical mistake by assessing its UK operations rather than the offshore subsidiary it used to employ its bankers.

Hartnett apologised for the "mistake" which press reports claimed had saved the bank £10m in tax, but denied misleading MPs about his relationship with bank officials.

Margaret Hodge, chair of the Public Accounts Committee, said that Hartnett had supervised and signed off on the tax deal despite assuring the Treasury Select Committee last month that he "did not deal" with Goldman Sachs' tax affairs.

Hartnett said that his comments meant he had no daily involvement with the bank. He had only become involved in the negotiations because relations between HMRC and the bank had broken down, he said.

"I did not do a deal personally. I did not waive interest away. A mistake was made, for which I am very sorry and my colleagues are very sorry," he told the committee.

Nobody at HMRC had been disciplined for the error, he said.

Last month HMRC announced that it was stepping up measures to tackle the 'tax gap', which is the difference between the tax which should in theory be collected and the amount that is actually collected.

Tax law expert Ian Hyde of Pinsent Masons, the law firm behind Out-Law.com, explained that HMRC was trying to resolve historic issues and bring in cash for the Government at the same time as being seen to enforce tax laws in a consistent way.

"The suspicion is that in squaring this circle, large corporate firms are being allowed to do deals in private. This latest leak does nothing to dispel that perception," he said.

In a statement, HMRC denied it offered 'sweetheart' deals but said that taxpayer confidentiality prevented it from correcting the allegations in detail.

"Several newspapers have run a story relating to leaked documents from HMRC. The picture presented is incomplete and therefore fundamentally flawed but taxpayer confidentiality prevents us from correcting the story in detail. HMRC's Permanent Secretary for Tax Dave Hartnett's long career in the tax service has been built on ensuring the right tax is paid by large businesses and individuals alike," a spokesperson said.

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