A ‘SWEETHEART’ DEAL struck between HM Revenue & Customs and the investment bank Goldman Sachs was made to save chancellor George Osborne “major embarrassment”, a court heard.
A legal challenge brought by anti-austerity activists UK Uncut is contesting the taxman’s settlement of the lengthy dispute.
Then-chief executive of HMRC Dave Hartnett (pictured) agreed in 2010 to waive interest penalties of up to £20m on offshore bonuses paid to bank staff, despite HMRC’s High Risk Corporate Board Programme, which reviews corporate settlements, recommending that the agreement be rejected.
According to an e-mail sent by Hartnett, which was included in the court papers, Goldman Sachs “went off the deep end at the [board’s] suggestion that they should pay interest”, reports the Financial Times.
He then pushed for a settlement, writing to a colleague that “the risks here are major embarrassment to the ChX [Chancellor of the Exchequer], HMRC . . . you and me, not least if [Goldman] withdraw from the code”. Banks including Goldman had just signed a code of practice designed to reduce UK tax avoidance.
Goldman’s deal was approved on 9 December 2010.
In his witness statement, Hartnett warned HMRC was concerned that reneging on the settlement would seriously damage its relationship with the bank, and could lead its behaviour becoming more aggressive in the future. He added Goldman regards the deal as final and would fight any attempts to cancel it.
Ingrid Simler QC, acting for UK Uncut, suggested the bank was rewarded for “difficult and aggressive behaviour”.
James Eadie, acting for the government, described UK Uncut’s case as “untenable” in the light of the National Audit Office’s findings in June last year.
Sir Andrew Park, leading the investigation into all five so-called ‘sweetheart’ deals found them to be “reasonable”. He based his findings on what HMRC could have expected to gain, had it engaged in litigation.
Despite finding largely in HMRC’s favour, the NAO’s report expressed dismay over how the settlements were reached, noting “specialist staff were sometimes excluded from the final settlement negotiations” and HMRC “did not always ensure that staff involved understood the reasons for settlement”.
Goldman Sachs said it would not comment as it is not party to the case.
A decision is expected to be made in the coming weeks.
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