HMRC in the High Court over Goldman Sachs ‘Sweetheart’ tax deal

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.”



Spokespeople available:

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:

The Lawyer magazine states that the case is one of the top cases of 2013.

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