Retired but not gone away

Readers of our blog will be familiar with the controversy surrounding the now retired Dave Hartnett, former Permanent Secretary for Tax at HMRC (see postings of 19 December 2011 and 21 December 2011). Readers will recall that the Public Accounts Committee ('PAC') issued a scathing report into alleged 'sweetheart' deals reached by HMRC with certain companies, including Goldman Sachs. Of particular concern to the PAC in the case of Goldman Sachs, was the failure by the HMRC negotiating team, led by Mr Hartnett, to consult with HMRC's Solicitor's Office before concluding the settlement. Nor did the negotiating team refer the case to HMRC's High Risk Corporate Programme Board ('the Board') which should have been involved in the process. When the Board did eventually consider the matter, it rejected the settlement that had been reached because it discovered that HMRC had failed to charge interest on the outstanding tax. Despite this, HMRC decided not to reopen or renegotiate the settlement, even though they received legal advice that they were entitled to do so.

Enter UK Uncut

Further revelations have recently come to light (see in particular The Guardian and The Telegraph, 2 May 2013). These revelations follow an action in the High Court brought by the campaign group UK Uncut Legal Action, which is seeking a declaration from the Court that the settlement reached in 2010 between Goldman Sachs and HMRC was unlawful.

As part of the action, new evidence has been placed before the Court, including a witness statement by Mr Hartnett. It would appear that the deal was struck by a handshake between Mr Hartnett and the Finance Director of Goldman Sachs on 19 November 2010 (the dispute had concerned national insurance contribution payments dating back to the 1990s). However, eleven days later, the Board rejected the settlement because HMRC had failed to collect any interest on the disputed sum. That very same day, the Chancellor, Mr Osborne, announced that the top 15 banks, including Goldman Sachs, had signed up to the voluntary Code of Practice on Taxation for Banks (the 'Code'). As readers will be aware, the Code seeks to change the behaviour and attitudes of banks towards tax avoidance. It would appear that Mr Hartnett chose to intervene personally at this point as he was concerned that Goldman Sachs might 'go off at the deep end' and withdraw from the Code. Mr Hartnett was also concerned that there would be political embarrassment for the government 'the risks here are a major embarrassment to the Chancellor, George Osborne'.

As a result the deal went ahead notwithstanding that the Board had rejected the deal.

Comment

Whether, in the words of the Director of UK Uncut Legal Action, Murray Worthy, this case exposes a 'controversial cover up at the heart of government', it must be of concern that a senior member of HMRC chose to ignore legal advice from his own department and the view expressed by the Board and did not reopen the settlement which had been reached with Goldman Sachs with the end result being that Goldman Sachs did not have to pay interest on the monies it owed to the Exchequer. It is to be hoped that the judgment of the High Court will shed further light on the facts and circumstances surrounding this particular settlement and that similar 'sweetheart' deals will not be reached by HMRC in the future.