Goldman Sachs 'sweetheart' tax deal with HMRC will stand as UK Uncut fails in court challenge

Judge told it was allowed to proceed to avoid embarrassing Chancellor

UK Uncut asked him to declare that HMRC decision was legally flawed

Deal in 2010 was worth up to £20m - but judge rules it wasn't unlawful

Campaign group UK Uncut Legal Action today lost its High Court challenge over the legality of the ‘sweetheart’ tax deal between HM Revenue and Customs and Goldman Sachs.
A judge was told the 2010 deal, worth up to £20million, was allowed to proceed to avoid ‘major embarrassment’ to Chancellor George Osborne and the tax authorities after the bank became ‘aggressive’ and allegedly made threats.
UK Uncut asked Mr Justice Nicol, sitting in London, to declare that HMRC's decision to let the deal go through was legally flawed and involved a breach of statutory duty.

Defeat: Campaign group UK Uncut Legal Action today lost its High Court (pictured) challenge over the legality of the 'sweetheart' tax deal between HM Revenue and Customs and Goldman Sachs

The judge ruled the deal was ‘not a glorious episode in the history of the Revenue’ but it was not unlawful.
Tax authority lawyers defended the settlement, saying it was among five big business deals declared ‘reasonable’ by a 2012 report of the National Audit Office (NAO).

 

UK Uncut says it is wrong to allow rich companies to avoid paying millions in tax while the Government imposes tough austerity measures on the poor and ordinary taxpayers are pursued for every penny.
Murray Worthy, a director of UK Uncut Legal Action, said after today's hearing that he was disappointed with the ruling.

Evidence: A judge was told the 2010 deal, worth up to £20million, was allowed to proceed to avoid 'major embarrassment' to Chancellor George Osborne (pictured yesterday) and the tax authorities

But he added: ‘This case has shown that the Government's tough talk on tax is just that - talk not substance.’

Defeat: Murray Worthy, the director of UK Uncut, outside the High Court in London today

Dave Hartnett, then permanent secretary for tax, initially shook hands on the Goldman Sachs deal on November 19 2010 following a long-running dispute over National Insurance contribution payments dating back to the 1990s.
Lawyers for UK Uncut put before the High Court in London an email and a witness statement they submitted showed that Mr Hartnett overruled legal advice, the HMRC's own guidelines and its internal review board to ensure the deal went ahead.
Just over a week after the handshake, the Revenue's high-risk corporate management board attempted to block the deal, just as the Chancellor announced that the top 15 banks in the country had signed up to a new code of conduct related to tax.
An email from Mr Hartnett on December 7 2010 described how Goldman Sachs allegedly ‘went off the deep end’ after the board decision and threatened to withdraw from the Government's bank code of practice, first published in December 2009.
The email warned: ‘The risks here are major embarrassment to the ChX (Chancellor of the Exchequer), HMRC, the LBS (the large business service of the HMRC), you and me, not least if GS withdraw from the code.’
The witness statement from Mr Hartnett, who retired as head of tax last summer following strong criticism of the Goldman Sachs deal from the public accounts committee, said the bank withdrawing from the code ‘would have embarrassed the Chancellor’.

Base: James Eadie QC, appearing for HMRC (whose London headquarters are pictured), accused UK Uncut of taking legal action 'to pursue politics by other means'

Ingrid Simler QC, appearing for UK Uncut, argued that the deal breached HMRC's statutory duties, and an ‘aggressive’ bank had been ‘rewarded’ for several years of failing to pay tax it owed, causing ‘real disquiet among the taxpaying public’.

'THIS WASN'T A GLORIOUS EPISODE IN HMRC'S HISTORY': JUDGEMENT

In his judgment, the judge, Mr Justice Nicol, said Dave Hartnetthad taken into account ‘the potential embarrassment to the Chancellor of the Exchequer if Goldman Sachs were to withdraw from the tax code’ when he decided to approve the Goldman Sachs settlement.
The judge said: ‘HMRC accepts that was an irrelevant consideration and should not have featured in his decision-making process.’
But ‘maladministration and illegality’ were separate issues, said the judge, and the settlement itself was not unlawful.
The judge listed other mistakes made by the Revenue as he observed: ‘The settlement with Goldman Sachs was not a glorious episode in the history of the Revenue.
‘The HMRC officials who negotiated it had not been briefed by the lawyers who were litigating against Goldman Sachs.
‘They relied on their belief or recollection that there was a barrier to the recovery of interest on the unpaid National Insurance contributions (NICs). That was erroneous.
‘HMRC accepts now that there was no such barrier. The officials who negotiated the agreement overlooked the need for approval from the Programme Board in relation to an agreement over £100 million.
‘HMRC now accepts that they should have appreciated this. Because the officials did not have this requirement to mind, they said nothing about it to Goldman Sachs and created the impression that the agreement was a done deal by the end of the meeting on 19th November.
‘HMRC accepts that was an error. Furthermore, HMRC did not appear to have taken a contemporaneous note as to the agreement which was reached on 19th November.
‘That allowed a degree of uncertainty to prevail for a time as to what precisely had been agreed.
‘In the end that has been resolved but in the course of the hearing, HMRC accepted that it would have been a good idea for a contemporaneous record to have been kept.’

She said the exact amount lost to the Revenue was not known but was at least £5million to £10million, and the Commons Public Accounts Committee had received evidence that it could be up to £20 million.
James Eadie QC, appearing for HMRC, accused UK Uncut of taking legal action ‘to pursue politics by other means’.
HMRC said in a press statement: ‘Large business tax settlements are a vital part of how HMRC secures tax revenues for the country and without them Britain's public finances would be seriously damaged.’
Anna Walker, campaigns director of UK Uncut Legal Action, said: ‘Obviously, while we are deeply disappointed that this deal has not been declared unlawful, the judge's ruling that top HMRC officials played politics with major tax deals to protect (Mr) Osborne's reputation is a major victory in exposing the truth behind these secret deals.
‘Despite not having won the case today, we still feel that this judgment has demonstrated that the Government is making a political choice to cut legal aid, public services and the welfare system, rather than take action to make corporate giants... pay their fair share of tax.
‘This case has exposed the lengths the Government will go to to look tough on tax avoidance and has been vital in holding the Government to account for its shameful actions.’
Solicitor Rosa Curling, of law firm Leigh Day, which represented UK Uncut Legal Action, said: ‘This is a disappointing decision but it has been an extremely important case to fight. It has forced HMRC to reveal the process by which it reached a deal with Goldman Sachs, a settlement which let the bank off an estimated £20 million tax owed.
‘Without this legal action HMRC would have succeeded in keeping secret the fact that the settlement was in part motivated by saving the blushes of the Chancellor rather than collecting the tax due to the public purse.
‘We hope through this litigation that HMRC has learnt from its mistakes in the past and will ensure that such sweetheart deals, like that reached with Goldman Sachs, do not happen in the future.’
Jim Harra, HMRC's director-general for business tax, welcomed the ruling.
‘The High Court's comprehensive dismissal of UK Uncut's claim puts to rest the fallacy that HMRC is soft on large businesses,’ he said.
‘HMRC has an exemplary record in relentlessly challenging those who avoid tax. We have recovered £34 billion in additional revenues from large businesses in the last seven years.

Bank: Dave Hartnett, then permanent secretary for tax, initially shook hands on the Goldman Sachs deal on November 19 2010 following a long-running dispute over National Insurance contribution payments

‘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 High Court's comprehensive dismissal of UK Uncut's claim puts to rest the fallacy that HMRC is soft on large businesses'

Jim Harra, HMRC director-general for business tax

‘This issue has been rigorously and repeatedly scrutinised - by the Public Accounts Committee, by a retired High Court judge on behalf of the National Audit Office and now by the High Court itself.
‘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.’