UK Uncut Legal Action Update- We’re in court on May 2nd!

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 scandal

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.

Leave a Reply