The High Court will next week hear evidence in the full hearing of the legal case against HMRC over the Goldman Sachs ‘sweetheart’ tax deal.
The case is being brought by UK Uncut Legal Action, a campaign organisation inspired by the anti-cuts direct action group UK Uncut. The case centres around a deal which was personally negotiated by Dave Hartnett (former head of HMRC) and Goldman Sachs resulting in the global investment bank being let off paying up to £20 million in interest charges on an unpaid tax bill.
UK Uncut Legal Action claims the deal was unlawful as it breached HMRC’s own rules and guidelines.
The case was granted permission to go to a full hearing in June 2012 – just one day before the NAO concluded its judge led investigation into tax settlements which found that the Goldman Sachs deal was ‘reasonable’. However, the Guardian recently revealed that the Head of the NAO, Amayas Morse, who set up the ‘independent’ review, appeared to undermine the process before it had even started by telling Dave Hartnett that the inquiry would find ‘nothing of substance’.
Anna Walker, spokesperson for UK Uncut Legal Action said:
“We are taking this case forward to get this deal declared unlawful in the High Court so that HMRC is no longer under the misapprehension that it is either legally, nor politically acceptable to let big business off paying the tax that they owe.
“Every year £25 billion is lost to the public purse through tax avoidance schemes such as the one Goldman Sachs used. The government cannot seriously claim to be clamping down on tax avoidance whilst it continues to let companies off millions in tax owed.
“The government’s claims are hollower still when the only people they are though on are the poorest people as they privatise the NHS, cut legal aid and force people on benefits to pay extra for a bedroom that their disabled child sleeps in.”
Rosa Curling, a lawyer from law firm Leigh Day, who is representing UK Uncut Legal Action, said:
“We have advised our clients that the deal reached between HMRC and Goldman Sachs was unlawful – it was in direct contradiction to HMRC’s duty to collect taxes and to do so properly, fairly and equally. Goldman Sachs is one of the richest banks in the world. The coalition government has stated on several occasions that it is committed to ensuring companies cannot avoid paying the taxes they owe.
“Despite this, the government has chosen to oppose our client’s claim. UK Uncut Legal Action has therefore had no option but to ask the Court to intervene so it can ensure a clear message is sent to all – that the tax rules apply to all corporations in the same way, however rich and powerful they may be.”
Rosa Curling and members of UK Uncut Legal Action will be at the Court and available for photographs and interview.
The facts of Goldman Sachs’ tax avoidance scheme and the deal.
In the 1990s, Goldman Sachs set up a company in the British Virgin Islands called Goldman Sachs Services Ltd. This company appears to have been set up to achieve payments to bankers of disguised bonuses, thereby reducing or avoiding national insurance contributions payable on them.
By 2005, HMRC had demonstrated that this scheme was an illegitimate tax avoidance device. In July 2011, HMRC’s own QC, Malcolm Gammie, gave broadly positive advice that HMRC should therefore be able to recover all monies owed to it by the company.
Despite this strong advice from HMRC’s own lawyers, Dave Hartnett, the boss at HMRC, met Goldman’s tax director, Mike Housden, and shook hands on a deal which allegedly let the bank off £20 million tax owed in 2010 and refused to go back on the deal after further legal advice and a rejection of the deal by HMRC’s internal Board.
Importantly, the day after we secured our review of HMRC’s ‘sweetheart’ deal with Goldman Sachs last June, 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.
Leigh Day has advised UK Uncut Legal Action that the agreement reached was in direct contradiction of HMRC’s own statutory duty to collect tax properly due, and its litigation settlement strategy prohibiting package deal settlements or settlements where HMRC splits the difference with the taxpayer. It is therefore unlawful.
For further information about the Head of the NAO’s comments regarding the judge led investigation: http://www.guardian.co.uk/politics/2013/mar/18/national-audit-office-tax-review
The Lawyer magazine states that the case is one of the top cases of 2013.
On Thursday May 2nd UK Uncut Legal Action will be going head-to-head in the High Court with HMRC over their sweetheart deal with Goldman Sachs. Our lawyers from Leigh Day & Co will be arguing that HMRC must face a day of reckoning for breaking their own rules when letting banking giant Goldman Sachs off at least £10 million in interest on a tax dispute. Our aim is for the High Court to declare that the agreement reached by HMRC with Goldman Sachs was unlawful. If we win our case it will send a clear message to HMRC – rich and powerful corporations must not make and break the rules. At a time when the government is making huge, unjust cuts to public spending, the rich must pay their fair share.
Throughout the history of this dodgy deal, which was first brought to light by Private Eye in April 2011, the powers that be have gone out of their way to try and protect those responsible from being brought to justice. Immediately after our first hearing last June, the National Audit Office (NAO) published a report on large ‘sweetheart’ tax settlements which found that the Goldman Sachs deal was ‘reasonable’ and in the public interest. However, the Guardian recently revealed how Britain’s most senior auditor, who set up the NAO review, appeared to undermine the process before it began by telling Dave Hartnett – the UK’s most senior tax official – that the inquiry would find ‘nothing of substance’.
The story of the dodgy deal begins in the 1990s, when Goldman Sachs set up a company offshore in the British Virgin Islands called Goldman Sachs Services Ltd. This set-up appears to have been designed to conceal the size of bankers’ bonuses. When questioned by HMRC it turned out that Goldman was not only concealing the amount of their banker’s bonuses but was also refusing to pay its share of national insurance on these six-figure bonuses.
How did they dodge the tax?
Goldman Sachs, along with 21 other investment banks and other firms, purchased blueprints for an avoidance scheme called an employee benefit trust (EBT). It took HMRC until 2005 for the courts to rule that these EBTs were illegitimate tax avoidance schemes. Whilst the other firms surrendered and handed over what they owed to HMRC, Goldman Sachs refused to pay its £30.81m bill.
By 2010, it is estimated that the unpaid bill with accumulated interest had mounted to at least £40m. In April 2010 HMRC and Goldman went to court, 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.
The sweetheart deal
However, instead of HMRC clawing the money back, then came ‘the deal’. Allegedly, on 30 November 2011, a high-level HMRC committee heard that their top expert, Dave Hartnett, had met Goldman’s tax director, Mike Housden, and as a result ‘a late submission had come in about a deal on which Hartnett had ‘shaken hands’ with Goldman Sachs’. The government was not going to get its full £40m, but only £30m. It is important to recognise that much of what is known about this case only became public because of the integrity of a HMRC whistleblower– Osita Mba.
UK Uncut Legal Action vs HMRC / Goldman Sachs
So that’s where we come in. Our case is important as we want to draw a line in the sand- HMRC must change its culture of being cosy with big business and instead represent the interests of the people. The public does not want a multi-billion pound investment bank and other corporations to be 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.
On Thursday May 2nd UK Uncut Legal Action will be going head-to-head in the High Court with HMRC over their sweetheart deal with Goldman Sachs.
Our lawyers from Leigh Day & Co will be arguing that HMRC must face a day of reckoning for breaking their own rules when letting banking giant Goldman Sachs off at least £10 million in interest on a tax dispute.
Our aim is for the High Court to declare that the agreement reached by HMRC with Goldman Sachs was unlawful. If we win our case it will send a clear message to HMRC – rich and powerful corporations must not make and break the rules.
At a time when the government is making huge, unjust cuts to public spending, the rich must pay their fair share.
We need people to come to court on the day to show your support for the case. As it is court we need to know names and please dress smart. If you want to come please email email@example.com.
See you in court!!