Yesterday, our judicial review of HMRC’s sweetheart deal with Goldman Sachs was dismissed, but a High Court judge ruled that embarrassment to George Osborne was a major factor in letting Goldman Sachs off up to £20 million in tax.
While we didn’t win the case, the judge’s ruling that top HMRC officials played politics with major tax deals to protect Osborne’s reputation is a major victory in exposing the truth behind these secret deals.
Here are our highlights of the coverage of the judgement:
Press Release: For Immediate Release
Contact: 07793031984 | 07591 992 825 | 07425 261 383
Campaigners from UK Uncut today claimed a ‘major victory’ as a High Court judge ruled that embarrassment to George Osborne was a major factor in letting Goldman Sachs off up to £20 million in tax. The judgment in the legal challenge, brought by UK Uncut Legal Action against a ‘sweetheart deal’ between HMRC and Goldman Sachs in 2010, found that the deal was lawful.
The High Court judgment by Mr Justice Nicol found that “Mr Hartnett [then permanent secretary for tax, HMRC’s top tax official] took into account the potential embarrassment to the Chancellor of the Exchequer if Goldman Sachs were to withdraw from the tax code. HMRC accepts that was an irrelevant consideration and should have not featured in his decision making process.”
The court also criticised HMRC’s catalogue of errors in failing to collect the tax owed. The judgment concludes; “The settlement with Goldman Sachs was not a glorious episode in the history of the Revenue. The HMRC officials who negotiated it had not been briefed by the lawyers […], they relied on their belief or recollection that there was a barrier to the recovery of interest [… and] the officials who negotiated the agreement overlooked the need for approval [of the deal].”
In declaring the deal lawful, the court found that HMRC’s top officials were legally allowed to take into account the bank’s threats to withdraw from the Code of Practice on Taxation for Banks in assessing whether to pursue Goldman Sachs for the tax owed.
Goldman Sachs’ support for the Tax Code had been announced by the Chancellor as part of a key policy to “ensure banks pay their fair share”. In evidence disclosed during the case it emerged that the investment bank was threatening to pull out of the Tax Code if it was forced to pay the £20 million, owed in interest from a failed tax avoidance scheme the bank had used in the 1990s. Following Goldman Sachs’ threats, HMRC’s top officials overruled their own internal review board and decided not to pursue the bank for the tax owed.
Responding to the court judgment, Anna Walker, Campaigns Director of UK Uncut Legal Action said:
“Obviously while we are deeply disappointed that this deal has not been declared unlawful, the judge’s ruling that top HMRC officials played politics with major tax deals to protect Osborne’s reputation is a major victory in exposing the truth behind these secret deals.”
“Despite not having won the case today we still feel that this judgment has demonstrated that the government is making a political choice to cut legal aid, public services and the welfare system, rather than take action to make corporate giants like Goldman Sachs, Amazon or Google pay their fair share of tax.
“This case has exposed the lengths the government will go to look tough on tax avoidance and has been vital in holding the government to account for its shameful actions.”
Notes to editors
For more information or interviews with the Directors of UK Uncut Legal Action call 07415 063 231 and 07591 992 825 and 07425 261 383 or email: firstname.lastname@example.org
David Standard at Leigh Day on 07540 332717
The Code of Practice on Taxation for Banks is a non-binding and voluntary statement of principles. In November 2010 George Osborne announced that the top 15 banks had adopted the code “to ensure banks pay their fair share”. For more information see https://www.gov.uk/government/news/top-15-banks-sign-code-of-practice
UK Uncut Legal Action has no plans to appeal the judgment at this stage, and is considering what their next steps will be in taking action against the government’s cuts.
Full text of the judgment
The history of the Goldman Sachs deal
Timeline of the case
For immediate release
HMRC LET GOLDMAN SACHS OFF TAX TO AVOID ‘MAJOR EMBARRASSMENT’ FOR GEORGE OSBORNE
In the legal case against HMRC over the ‘sweetheart’ tax deal with Goldman Sachs, details have emerged of a controversial cover up to avoid political embarrassment at the heart of government.
It came to light in the High Court that the former tax chief, Dave Hartnett, chose to waive the £20 million that Goldman Sachs owed to HMRC to save his personal reputation, and avoid major political embarrassment for George Osborne and HMRC. The political scandal has been revealed by UK Uncut Legal Action, the anti-cuts campaigners who have brought the case against HMRC.
Dave Hartnett personally overruled legal advice, the HMRC’s own guidelines and HMRC’s internal review Board which all stated that HMRC was in a position to force Goldman Sachs to pay back the money owed. Shortly after the oral deal had been made between Dave Hartnett and Goldman Sachs to waive the £20 million that Goldman Sachs owed, the HMRC’s High Risk Corporate Programme Board, an internal oversight board, rejected the deal and recommended that negotiations be re-opened to recoup the money owed.
In an email, that has come to light in court, written by Dave Hartnett to other senior tax officials, Hartnett states that when Goldman Sachs were informed of the Board’s decision to reject the deal and force the bank to pay the interest, the bank “went off the deep end”. He also warns of potential major political embarrassment stating: “the risks here are major embarrassment to the Chancellor of the Exchequer, HMRC, the Large Business Service of the HMRC, you and me, not least if GS withdraw from the Code.”
In Dave Hartnett’s written witness statement, he states that “Goldman Sachs had been involved in tax avoidance in the past and we regarded their signing of the Code as a valuable step in securing improved tax behaviour from them. This would have been under threat had we reneged on the settlement (they said they would withdraw from the Code if HMRC reopened the settlement).”
Dave Hartnett says that this would be a source of major embarrassment for George Osborne because only one week before, the Chancellor had publicly announced that the government was cracking down on tax avoidance by big banks and had successfully forced the top 15 banks, including Goldman Sachs, to sign up to the Code of Practice on taxation designed to reduce tax avoidance.
Murray Worthy, Director of UK Uncut Legal Action said:
“This case exposes a controversial cover up at the heart of government by HMRC and former tax chief, Dave Hartnett to avoid political embarrassment for George Osborne.
“George Osborne announced the Bankers Code for tax avoidance with great fanfare, claiming that he was forcing banks to pay their fair share. Yet on the same day, Goldman Sachs were threatening to withdraw from the Code if HMRC forced them to pay the tax they owed. HMRC waived millions of pounds owed by Goldman Sachs against legal advice and HMRC’s own guidelines to salvage Dave Hartnett’s personal reputation and George Osborne’s veneer of tough tax talk.”
Anna Walker, Campaigns Director at UK Uncut Legal Action said:
“This case shows the lengths that the government will go to in order to preserve the public perception that government is getting tough on tax avoidance. HMRC have tried tirelessly to cover up this deal. They have stonewalled the Public Accounts Committee, whitewashed the NAO report, criminalised a whistle blower and have fought this legal case every step of the way.
“In the run up to the G8, where David Cameron and George Osborne will pronounce themselves as global leaders in tackling tax avoidance, this case shows what is going on behind closed doors and the headline grabbing announcements – tax avoidance as usual, sweetheart deals to avoid red faces of ministers and giving in to threats from big business.”
“Every year, £25 billion of tax is avoided in the UK. This is because the government refuses to stand up to big business and banks like Goldman Sachs and chooses to let them off paying their fair share. The government is making a political choice to cut legal aid, privatise the NHS and slash the welfare state instead of making big business and banks pay for the crisis they caused.”
UK Uncut Legal Action is seeking a ruling that the deal reached between Goldman Sachs and HMRC was unlawful because it was in direct contradiction of HMRC’s own statutory duty to collect tax properly, and its own guidance.
– Timeline of the case
– UK Uncut Legal Action Skeleton Argument
– Dave Hartnett witness statement
– Dave Hartnett email 07-12-10 warning of “major embarrassment”
Spokespeople available Rosa Curling from Leigh Day and members of UK Uncut Legal Action will be at the Court and available for photographs and interview.
Documents from court and key legal arguments are available on request or at ukuncutlegalaction.org.uk
For more information/interviews, please call UK Uncut Legal Action on 07415 063 231 and 07591 992 825 and 07425 261 383 email: email@example.com
David Standard at Leigh Day on 07540 332717
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.
George Osborne announces in October that Banks have one month to sign up to the Code
George Osborne announces banks have signed up to Code
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.