Activists given High Court go ahead to pursue HMRC over alleged 'sweetheart' deals

Out-Law News | 18 Apr 2012 | 3:29 pm | 2 min. read

A group of activists is to raise a preliminary challenge to an alleged 'sweetheart' tax settlement between HM Revenue and Customs (HMRC) and investment bank Goldman Sachs, according to a national newspaper.

The Guardian confirmed that UK Uncut Legal Action has been granted a preliminary permission hearing, after which the High Court will decide whether the group's case is strong enough to proceed to a full judicial review. The hearing will take place on 13 June, according to the newspaper.

Tax law expert Eloise Walker of Pinsent Masons, the law firm behind Out-Law.com, branded the exercise a "witch hunt" which could lead to the department wasting its resources by pursuing taxpayers even on the most uncertain of cases.

"Frankly I'm surprised the court gave the go-ahead for such a witch-hunt to commence," she said. "It potentially de-stabilises the whole point of settlement out of course – where both parties weigh up pros and cons and agree a compromise. It will encourage HMRC to enter into a fever of pursuing every taxpayer on every potential case, no matter how uncertain the outcome - and how does wasting millions in taxpayers' money on hopeless litigation improve the state of the nation's finances overall?"

The Guardian said that Goldman Sachs had not opposed the hearing or rebutted UK Uncut Legal Action's claims.

"We're pleased we will be able to present our arguments at this hearing and look forward to the judge granting us permission to proceed with a judicial review," said Tim Street, director of the group. "A judicial review is clearly necessary and we're confident that we have a strong case. The decision by HMRC to let Goldman Sachs off an alleged £10m tax bill must be reversed and the money handed over to the public purse."

In a report published at the end of 2011, the House of Commons Public Accounts Committee identified "specific and systemic" failures in the way in which HMRC handled tax disputes with large companies. Permanent Secretary for Tax Dave Hartnett, who recently announced his retirement, appeared before the Committee in October to answer allegations that he had misled MPs about his involvement in the settlement with Goldman Sachs.

The department has been accused of forgiving the investment bank of at least £10 million in interest on a disputed tax payment following a technical mistake by HMRC. The Committee said that it had received "evidence from a whistleblower" that the outstanding amount could have been as high as £20m.

The Guardian newspaper and Private Eye uncovered evidence of another arrangement, between HMRC and the mobile phone company Vodafone, in 2010. MPs have claimed that this deal may have lost the Exchequer "around £8 billion".

HMRC announced in February that it planned to appoint a senior 'assurance commissioner' to oversee any tax settlements for more than £100 million reached with large companies. The commissioner, who will not have a role in any taxpayer's individual affairs, will challenge whether any proposed settlement secured the correct amount of tax efficiently and ensure taxpayers are treated even-handedly, the department said. An expert tax commissioner decision is currently required for tax settlements of £250m or more.

The department said that it would not comment on "ongoing litigation", but has previously described its settlements with large businesses as a "vital part" of how it secures tax revenues for the UK.