Bank 'in sweetheart deal over tax'

Goldman Sachs

The tax authorities reached a "sweetheart deal" with Goldman Sachs to avoid "grave embarrassment" after the "aggressive" banking giant threatened to withdraw from a new code of practice aimed at reducing tax avoidance, the High Court has been told.

The accusation was made by tax activists UK Uncut Legal Action, who say rich companies are wrongly being let off paying millions in tax while the Government imposes tough austerity measures on the poor.
The case concerns a 2010 settlement reached by HM Revenue and Customs (HMRC) with Goldman Sachs allowing it to avoid a multimillion-pound interest bill on unpaid tax on bonuses. UK Uncut is seeking a High Court declaration that the agreement was unlawful and in breach of the taxman's guidelines. They want £20 million allegedly involved to be returned to the public purse.

Ingrid Simler QC, appearing for UK Uncut, said the decision of David Hartnett, permanent secretary for tax at the time, to "shake hands" on the settlement breached the HMRC's statutory duties. She said that it amounted to Goldman Sachs being "rewarded" for several years of failing to pay tax it owed.
Ms Simler told Mr Justice Nicol, sitting at London's High Court , the deal should be declared unlawful because "irrelevant considerations" were taken into account when it was officially confirmed. She said the initial error in reaching the settlement on November 19 2010 was identified quickly by HMRC internal review procedures, and its High Risk Corporate Programme Board rejected the deal.

But Mr Hartnett and another tax commissioner elected to affirm the settlement on December 19 and not re-open it after the "aggressive conduct" of Goldman Sachs following the Board's rejection. She referred to an email in which Mr Hartnett referred to "risks of major embarrassment" to Chancellor George Osborne and himself if the deal did not go ahead.

Goldman Sachs had threatened to withdraw from a new code of conduct intended to reduce tax avoidance signed up to by the top 15 banks and just announced by Mr Osborne. Ms Simler said: "In this case the irrelevant considerations are personal embarrassment and embarrassment to the Chancellor."

James Eadie QC, appearing for HMRC, argued a 2012 report by the National Audit Office (NAO) vindicated the deal as "reasonable" as the tax authority was likely to have received less if it had gone to court to recover payments and lost. Mr Eadie accused UK Uncut of using the courts "to pursue politics by other means".

Mr Eadie said the decision of the two commissioners to stand by the settlement orally agreed with Goldman Sachs had been examined in detail by the NAO and found to be neither irrational nor improper. The settlement resulted in large sums being paid by the bank to the Revenue.

Mr Justice Nicol said he would give his ruling in the case at a later date.

© 2013 Press Association
Read Full Story