Hartnett admits £8m error in MP onslaught

A MISTAKE worth up to £8m was made by HM Revenue & Customs settling Goldman Sachs’ National Insurance liabilities, permanent secretary for tax Dave Hartnett conceded today.

The Public Accounts Committee (PAC) scrutinised Hartnett today following allegations over his role in negotiating a deal with Goldman Sachs investment bank. The permanent secretary admitted that a mistake had been made when making the settlement. Auditor general Amyas Morse said that the National Audit Office’s review of HMRC accounts and procedures estimated the error to be worth “between £5m and £8m”.

Hartnett repeatedly said that taxpayer confidentiality prevented him from informing the committee of the nature of the mistake, a point that was challenged by the committee. The MPs said there was a public interest balance that overrides taxpayer confidentiality and that Parliament is unable to properly scrutinise the department if HMRC is unable to provide details about errors made.

Margaret Hodge, the committee chairwoman, accused Hartnett of lying to the Commons Treasury select committee having told them he didn’t deal with the tax affairs of Goldman Sachs.

Subsequent leaked documents showed that he did meet the company with regards to a dispute over National Insurance contributions due following HMRC’s successful challenge of employee benefit trusts (EBTs). Along with 21 other businesses, Goldman Sachs was required to pay NI on the payments made from the offshore trusts to its employees. The other 21 companies paid the liabilities, but Goldman Sachs disputed the charges.

Hartnett said that he attended the meeting because the relationship between the company and HMRC was poor. The deal was signed off by Hartnett, despite the HMRC governance strategy forbidding commissioners who are involved with negotiations to sign it off.

The Goldman Sachs case was removed from the Revenue’s high risk corporate programme (HRCP) governance structures, along with three other high profile cases, one of which is believed to be Vodafone. Hartnett said that “bespoke” procedures where devised in these cases.

Hartnett’s involvement in the Goldman Sachs case was partly because he was the only one of the four HMRC commissioners to have “deep tax knowledge”. He said that HMRC governance procedures had changed so that two commissioners with no involvement in the negotiations would be required to sign off a deal. Another two commissioners would be appointed, one of whom has tax knowledge, he added.

Hodge’s concluding remarks centred on the lack of transparency regarding HMRC processes. “What comes out of this for me is that there is a huge sum of money – £25.5bn – potential income to the taxpayer, which is incredibly important at a time of deficit reduction, where you are responsible for trying to collect it. You are also a member of the board that oversees your action. You are also a commissioner that oversees the board,” she said.

“The NAO does not do a detailed assessment of whether you are getting value for money. At the moment there is no way in which you are accountable to the public or the MPs about whether you are getting value for money,” Hodge added.

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