UK Uncut Legal Action

Law firm Leigh Day & Co have written to HMRC on behalf of UK Uncut Legal Action – a campaign group inspired by the anti-cuts direct action network UK Uncut – threatening a legal challenge over the Revenue’s ‘sweetheart’ tax deal with the global investment bank, Goldman Sachs. [1]

They say that they will take legal action if a settlement that was reached between HMRC and Goldman Sachs in December 2010 – which reportedly saved the banking giant £10m in interest on unpaid taxes [2] – is not quashed.

The legal action will put further pressure on David Hartnett, Permanent Secretary for Tax, as it follows the leaking of documents which show how top tax officials shook hands late last year on the secret settlement [3], which UK Uncut Legal Action claim was contrary to HMRC’s own policies and is therefore unlawful [4].

Leigh Day & Co have issued a letter before claim to HMRC allowing them 14 days to quash the settlement agreement and reconsider any settlement with the US firm to repay the sum owed to the UK treasury. The London based law firm has confirmed that if the settlement is not quashed they will issue proceedings seeking specific disclosure for all internal documents regarding the process by which the agreement was reached between HMRC and Goldman Sachs regarding the reported £40m owed.

Murray Worth from UK Uncut Legal Action said, “Most people will see this as incredibly unfair. The government’s top tax man appears to have secretly agreed to let a global investment bank off millions in tax, while ordinary people are paying for the massive £850bn bank bailout with their jobs, welfare payments, pensions and public services”.

Richard Stein from Leigh Day & Co said: “If this was an error by a junior official then that is fine and it can be rectified through quashing this settlement. It must not be swept under the carpet or buried within oak panelled rooms. It is money which should be contributing to all aspects of the country.”

ENDS

For further comment:

Leigh Day & Co:David Standard 07540332717

Notes to Editors

[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 £40mn.

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, it has been reported that 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] See the Guardian article