Archive for June, 2012

Goldman Sachs have £20m of our money, but we’re on the road to getting it back

(This article first appeared on the New Statesman website on 20th June 2012)

Last Wednesday we were delighted when a High Court judge declared that we will be allowed to take forward our case against HMRC over its decision to let banking giant Goldman Sachs off of up to £20m in interest on an unpaid tax bill. The banking giant has owed this sum since December 2010 and we want HMRC to correct their error and make Goldman Sachs pay their debt as soon as possible so that it can be invested in our vital public services at this time of unprecedented spending cuts.

Our aim now is to have the High Court declare that the agreement reached by HMRC with Goldman Sachs was unlawful. We also want the court to order HMRC to take steps to reopen the agreement it reached with Goldman Sachs about the interest owed and seek to recover that money.

Importantly, the day after we secured our review of HMRC’s “sweetheart” deal with Goldman Sachs, the National Audit Office (NAO) published a report on how HMRC settled five large tax disputes with big business, each of these being examined by retired tax judge Sir Andrew Park. We believe that, while the report acknowledges some failures of decision-making and governance in the department, it raises far more questions than it answers.

For example, the five companies in question remain unnamed, so that the truth about these huge tax deals continues to be veiled behind HMRC’s claims of taxpayer secrecy for the powerful businesses in question.

Park also judges the merits of each of the five tax deals on grounds of “reasonableness”, finding that each settlement was “reasonable”. Crucially, however, Park does not – and cannot – make a judgment on whether the settlements were legal.

The report does appear to cover the Goldman Sachs dispute (understood to be “Company E”) and gives some indication of why HMRC chose not to collect the unpaid tax owed to it.

Previously, HMRC’s outgoing tax chief, Dave Hartnett – who is understood to have shaken hands with Goldman Sachs on the deal – admitted that he “made a mistake” for which he was “entirely responsible.” However, Park finds that HMRC’s decision not to charge interest on Company E’s unpaid tax bill wasn’t a mistake but a “deliberate decision” and “made sense in the context of reaching a settlement on all the issues under consideration” with the company. The problem with package deals like this is that they mainly benefit the interests of corporations, which want to minimise their tax bills, and enfeeble HMRC’s ability to enforce its own rules and raise the necessary revenue.

Park outlines how the department’s own “High Risk Corporates Programme Board” rejected the decision waiving Goldman Sachs interest on their tax bill, but that HMRC commissioners (which included Hartnett) decided to approve the settlement anyway. No explanation was given as to why the commissioners took this course of action at the time and no reasons were recorded until three months later. Even now those reasons remain secret.

Yet somehow Park still concludes that HMRC’s settlement with “Company E” was “reasonable”. This is despite Park himself affirming that there was “no legal barrier to charging interest” on the company’s outstanding tax bill and the fact that HMRC’s own rules prohibit it from making package deals with businesses.

Given the clear gaps and omissions in the NAO report, it remains vital that our case against HMRC goes ahead, to judge whether the deal with Goldman Sachs was legal, and to expose the truth behind this and other deals as far as possible. It is also important that the Public Accounts Committee follows up its December 2011 report concerning tax disputes in order to challenge and ultimately end the “cosy” relationship between HMRC and big business that it identified.

The public interest in these matters is clear – people have a right to know why a multi-billion pound investment bank and other corporations appear to have been let off the tax they owe while vital public services are being cut. The government now has a choice to make. It can clamp down on the billions of pounds worth of tax avoided by big business or continue making ordinary people pay for the economic crisis with their jobs and pensions.

Press release: UK Uncut campaigners secure High Court challenge of Goldman Sachs tax deal

A High Court judge has declared that the anti-cuts campaign group UK Uncut Legal Action should be allowed to take forward their case against HMRC over its decision to let banking giant Goldman Sachs off of up to £20 million in tax- owed since December 2010.

This blow to HMRC comes ahead of tomorrow’s report from the National Audit Office who have been investigating five similar tax deals with as yet unnamed companies, but believed to include Goldman Sachs and Vodafone.

The case for a judicial review is being led by campaign group UK Uncut Legal Action – a spin-off organisation from the UK Uncut protest movement – and public law specialists Leigh Day & Co. It is expected that the court hearing will be in October and last five days. UK Uncut Legal Action’s case is being funded by thousands of small donations from individuals, largely raised through appeals on Twitter and Facebook.

This follows months of parliamentary scrutiny in 2011 over the way HMRC deals with the tax affairs of big business. In a report published in December 2011, the Public Accounts Committee concluded “We have serious concerns about how the Department handled some cases involving large settlements, where governance arrangements were bypassed or overlooked until it was too late.” The report also described the organisation as unaccountable and secretive, and declared that senior tax officials gave “imprecise, inconsistent and potentially misleading” evidence to parliament.

Today’s ruling gives permission to UK Uncut Legal Action to take forward a judicial review which will decide whether or not the alleged ‘sweetheart deal’ with Goldman Sachs was legal. The judge did not give permission for the group to take forwards a claim seeking to ‘quash’ or strike down the deal, and the group are consulting with their lawyers on whether or not to appeal this decision.

Murray Worthy of UK Uncut Legal Action said “We welcome the court’s decision that we can take forwards our case challenging the alleged ‘sweetheart deal’ between HMRC and Goldman Sachs. The judge agreed that this case is clearly in the public interest and that HMRC have real questions to answer about the legality of this deal.”

“It is vital that these issues are addressed in court. The National Audit Office and Public Accounts Committee investigations are looking at policy issues, but this case is a question of legality and justice which only the courts can decide.”

“The public have a right to know why a multi-billion pound investment bank appears to have been let off the tax they owe while vital public services are being cut. The government is making a political choice in making ordinary people pay for the economic crisis with their jobs and pensions, rather than clamping down on billions of pounds worth of tax avoidance by big business.”

Richart Stein of Leigh Day & Co said “I am really pleased that the courts have decided that a public hearing can go ahead looking into the deal between HMRC and Goldman Sachs. We look forward to seeing the NAO report and we will re-consider how we advance the case after we have seen it.”

ENDS

Photo available on request.

(1) DETAILS OF THE TAX DISPUTE

In the 1990s, Goldman Sachs set up a company offshore in the British Virgin Islands called Goldman Sachs Services Ltd, which appears to have been designed to conceal the size of their bankers’ bonuses. Goldman Sachs also begrudged paying its share of UK national insurance on these six-figure bonuses.

The company, along with 21 other investment banks and other firms, purchased blueprints for an avoidance scheme called an employee benefit trust (EBT). It took the Revenue until 2005 for the courts to rule that these EBTs were merely illegitimate tax avoidance devices. Whilst the other firms surrendered and handed over what they owed, Goldman Sachs refused to pay its £30.81m bill.

By 2010, it is estimated that the unpaid bill with accumulated interest had mounted to £40m.

In April 2010 a judge threw out the claim from the bankers that their true employer was in the British Virgin Islands. In July 2010, HMRC’s own QC, Malcolm Gammie, gave “broadly positive” advice that the government was in a strong position to get all of its money.

However, on 30 November 2010, a high-level HMRC committee heard that their top expert, David Hartnett, had met Goldman’s tax director, Mike Housden, and as a result “a late submission had come in about a deal on which Dave Hartnett had ‘shaken hands’ with Goldman Sachs”. The government was not going to get its full £40m, but only £30m.

According to the Guardian (11 October 2011) HMRC sources privately confirm that £10m of taxpayers’ money was thrown away because of a “technical mistake” by an unidentified official, junior to Hartnett, who misinterpreted the law. They claim that the National Audit Office, which audits HMRC accounts, has accepted the situation.

(2) ‘Revenue to appear in court over Goldman Sachs ‘sweetheart’ deal’

www.guardian.co.uk/politics/2012/apr/18/hmrc-goldmansachs

(3) On 14th June the NAO will publish a report entitled ‘Tax and duties: Larger tax settlements: a follow-up report’. The review will examine the reasonableness of five of the largest tax settlements with big business.

www.nao.org.uk/publications/work_in_progress/larger_tax_settlements.aspx

(4) A December 2011 report from the Public Accounts Committee suggested HMRC risks losing “many millions of pounds” in cases where it is chasing a total of more than £25bn in unresolved tax bills because of a “too cosy” relationship with big business.

www.telegraph.co.uk/finance/yourbusiness/8966704/MPs-say-HMRC-are-too-cosy-with-the-City.html

PRESS RELEASE: Judge to rule on legal review of Goldman Sachs tax deal

  • UK Uncut Legal Action is in court on June 13th where a judge will decide whether a judicial review of HMRC’s tax deal with Goldman Sachs can go ahead. (1)
  • The campaign group is demanding that the decision to let Goldman Sachs of millions in unpaid tax is reversed and the money returned to the public purse.
  • Support for the case has been voiced by leading Trade Unions, NGOs and MPs.
  • Over £19,000 has been raised for the case in six months showing a huge level of public support.
  • The decision comes the day before a report from the National Audit Office who have been investigating similar tax deals with several as yet unnamed companies.

UK Uncut Legal Action, a campaign group inspired by the anti-cuts direct action group UK Uncut, will find out on June 13th whether they will have secured a judicial review of HMRC’s alleged ‘sweetheart’ tax deal with Goldman Sachs. (2)

This comes a day before the National Audit Office (NAO) publishes a report examining the ‘reasonableness’ of several large tax settlements with big business. (3)

UK Uncut Legal Action have welcomed scrutiny into tax deals from both the NAO and the Public Accounts Committee but claim the legal action they are taking is the only mechanism that can result in a declaration that the Goldman Sachs tax deal was unlawful, as well as returning the £20 million owed so that it can be invested in vital public services. (4)

Richard Stein from Leigh Day & Co said: “We wrote to HMRC in October 2010 asking them to quash the deal and reclaim the millions unpaid in taxes from one of the world’s richest banks but received no response. We chased again in November and they claimed they needed more time.

“They have now replied with what we feel is an extremely weak argument as to why this decision cannot be reversed, therefore, we will now progress this legal action and issue proceedings in the High Court.”

UK Uncut Legal Action has also launched a public fundraising appeal, which has raised nearly £19,000 in six months with over two thousand people making small donations. This represents what the campaign group is calling a ’people’s court case’ against HMRC.

Support for this legal action has also been voiced by leading anti-poverty NGOs, MPs and Unions, such as the National Union of Teachers, Unite, PCS, GMB, Compass and the Tax Justice Network, who have signed onto a UK Uncut Legal Action statement which says: ”It is undeniably in the public interest that this important case should go through the UK courts in order to ensure transparency, accountability and fairness.”

Murray Worthy, director of UK Uncut Legal Action said:

“There is overwhelming public support from Unions, NGOs, MPs and thousands of ordinary people who want to see this dodgy tax deal challenged in the courts. It shows the deep level of outrage that people feel over state sanctioned tax dodging by big business, while the government destroys public services that ordinary people rely on, saying that there is no money.

He continued, “It shows that the government is making a political choice to turn a blind eye to tax dodging- which loses the public purse £25bn billion a year. The government is slashing public services and support for the poorest instead of clamping down on rich tax dodgers. This cannot be allowed to continue. Dave Hartnett’s retirement is welcome news for campaigners but HMRC needs a massive culture change to stop special treatment for corporations and secret, unlawful handshake deals”

Notes:

(1) DETAILS OF THE TAX DISPUTE

In the 1990s, Goldman Sachs set up a company offshore in the British Virgin Islands called Goldman Sachs Services Ltd, which appears to have been designed to conceal the size of their bankers’ bonuses. Goldman Sachs also begrudged paying its share of UK national insurance on these six-figure bonuses.

The company, along with 21 other investment banks and other firms, purchased blueprints for an avoidance scheme called an employee benefit trust (EBT). It took the Revenue until 2005 for the courts to rule that these EBTs were merely illegitimate tax avoidance devices. Whilst the other firms surrendered and handed over what they owed, Goldman Sachs refused to pay its £30.81m bill.

By 2010, it is estimated that the unpaid bill with accumulated interest had mounted to £40m.

In April 2010 a judge threw out the claim from the bankers that their true employer was in the British Virgin Islands. In July 2011, HMRC’s own QC, Malcolm Gammie, gave “broadly positive” advice that the government was in a strong position to get all of its money.

However, on 30 November 2011, a high-level HMRC committee heard that their top expert, David Hartnett, had met Goldman’s tax director, Mike Housden, and as a result “a late submission had come in about a deal on which Dave Hartnett had ‘shaken hands’ with Goldman Sachs”. The government was not going to get its full £40m, but only £30m.

According to the Guardian (11 October 2011) HMRC sources privately confirm that £10m of taxpayers’ money was thrown away because of a “technical mistake” by an unidentified official, junior to Hartnett, who misinterpreted the law. They claim that the National Audit Office, which audits HMRC accounts, has accepted the situation.

(2) ‘Revenue to appear in court over Goldman Sachs ‘sweetheart’ deal’

www.guardian.co.uk/politics/2012/apr/18/hmrc-goldmansachs

(3) On 14th June the NAO will publish a report entitled ‘Tax and duties: Larger tax settlements: a follow-up report’. The review will examine the reasonableness of five of the largest tax settlements with big business.

www.nao.org.uk/publications/work_in_progress/larger_tax_settlements.aspx

(4) A December 2011 report from the Public Accounts Committee suggested HMRC risks losing “many millions of pounds” in cases where it is chasing a total of more than £25bn in unresolved tax bills because of a “too cosy” relationship with big business.

www.telegraph.co.uk/finance/yourbusiness/8966704/MPs-say-HMRC-are-too-cosy-with-the-City.html

Can you come to court with us on Wednesday 13th June?

Dear Everyone,

On Wednesday 13th June a judge will consider whether our Judicial Review should go through to a full hearing later this year. We have spaces in the public gallery to fill and we would like you to join us.

Please email us at ukuncutlegal[@]gmail.com if you a) ‘do smart’ b) are free for a couple of hours next Wednesday at the Royal Courts of Justice.

The more the merrier! It’s crucial to convey how important this court case is! Why did Goldman Sachs get let off £20m in tax? It’s crucial that a judge considers the legality of the decision. First we must convince judge number 1 on Wednesday 13th that this is in the public interest!

Get in touch and come to the peoples court case!

UK Uncut Legal Action