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hmrc wins high court case over 20m

HM Revenue & Customs has won a court case against pressure group UK Uncut over claims that a backroom deal it struck with Goldman Sachs, in which it agreed to let the bank off a £20m interest payment, was unlawful.

hmrc wins high court case over 20m

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In today’s ruling, High Court judge Justice Nicol said, while HMRC’s so-called “sweetheart” deal with Goldman Sachs in 2010 had been lawful, it “was not a glorious episode in the history of the Revenue”. The deal was brokered by the then permanent secretary for tax, Dave Hartnett who has since retired.

According to the ruling, in 2010 Goldman Sachs and HMRC were in discussions over a number of points, one of which was whether or not the bank should pay £100m National Insurance Contributions for some of their employees. It was a question which had been raised with a number of other firms who had all settled with HMRC and agreed to pay in 2005.

Goldman Sachs however, continued to contest the payment and it was agreed in a deal brokered by Hartnett that if it paid the NICs, Goldman Sachs would be let off accrued interest of £20m.

Osborne embarrassed

One of the reasons given by Hartnett at the time for allowing Goldman Sachs off the payment, was a concern that chancellor George Osborne would be embarrassed if the bank carried out a threat to remove itself from the Tax Code.

HMRC admitted that this was a mistake and that Hartnett’s concerns were irrelevant.

The group which brought the case, UK Uncut, is a grassroots movement established in 2010 to fight what it sees as an unjust system under which, it says, politicians cut public services but let off wealthy individuals and companies from paying their full taxes.

In a statement, HMRC said it welcomed the High Court judgement and pointed to the £34bn “additional revenue” it has collected in the past seven years as proof that it is not soft on large businesses.

Director general for business tax Jim Harra said: “The High Court’s judgment confirms what HMRC has always said: that while we made errors in settling the Goldman Sachs dispute, we made the right settlement in the circumstances, and that our decision was both proper and lawful.

“The public can have confidence in our governance processes, which we have strengthened, providing greater levels of scrutiny, transparency and role separation.

“In its definitive judgment, the High Court has now drawn a line under the Goldman Sachs issue. HMRC can now get on with the critical job of working to ensure that all individuals and companies, big and small, pay the tax they owe to fund the UK’s essential public services.”

While HMRC will clearly be pleased to have won this case, the episode is surely an embarrassment at a time when the UK and many governments around the world are clamping down on tax evasion and aggressive tax avoidance by individuals and companies.

Indeed, earlier this month Osborne was claiming a “significant step forward” in the fight against tax evasion after all the UK’s Crown Dependencies with financial centres signed up to an agreement on tax transparency.

The case also raises questions over HMRC’s ability to properly administer the UK’s tax system, as suggested very strongly by the Public Accounts Committee in April this year.

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