NAO concludes HMRC ‘sweetheart’ deals were ‘reasonable’

by Calum Fuller

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14 Jun 2012

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National Audit Office

THE NATIONAL AUDIT OFFICE has defended HM Revenue & Customs' ‘sweetheart' deals with five parties after long-running tax disputes. It did, however, raise concerns over the settlement process.

It reached its conclusions on the basis of Sir Andrew Park's report into the matter, which ruled that the Revenue had struck ‘reasonable' deals in all five cases and that the overall outcome for the public purse was good, with at least one case described as "better than good".

The NAO based its findings on how much HMRC could have expected to win if it had engaged in litigation in each case.

While the Audit Office seconds the former judgment by Park, it is concerned over how the deals with the parties – including international investment bank Goldman Sachs and telecoms giant Vodafone – were struck.

In particular, the NAO expressed alarm that "specialist staff were sometimes excluded from the final settlement negotiations" and HMRC "did not always ensure that staff involved understood the reasons for settlement".

Poor communication, it said, resulted in a loss of confidence in the settlements "both internally and externally".

The UK Uncut activists' group yesterday won permission to challenge HMRC over the deals in the High Court.

The NAO is not convinced the Revenue stuck to its own strategy on settlements, which does not permit "splitting the difference" in cases where the taxpayer can either pay the full amount or nothing at all. In one case, it says, the taxman received less than it would have won in litigation.

There are fears, too, that while legal advice is not required before settling terms, HMRC failed to consult its lawyers when it should have done, due to ongoing proceedings.

"It was not appropriate to set up governance arrangements specific to certain cases or to fail to apply processes correctly," said Amyas Morse, head of the NAO.

"On the basis of Sir Andrew Park's reports, I conclude that the settlements reached by HMRC in these five cases were all reasonable... In settling them, the department successfully resolved multiple, long-outstanding tax issues."

For its part, a spokesman for HMRC said it "welcomes" Park's report.

He said: "We have always maintained that the settlements represented good value for the UK, by making sure that large businesses play by the rules in often complex international transactions.

"In February, we announced new governance arrangements for significant tax disputes, to provide greater transparency, scrutiny and accountability, and we are currently appointing a new tax assurance commissioner, to ensure a clear separation between those who negotiate and approve settlements."

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