US bank ‘sweetheart’ deal attacked
Posted: 3rd May 2013
A deal between the tax authorities and banking giant, Goldman Sachs, has caused ‘grave public disquiet’ and should be declared unlawful, it has been argued at the High Court. The unprecedented case is being brought by tax avoidance campaign group, UK Uncut Legal Action Limited, which says that rich companies are wrongly being let off paying millions in tax in ‘sweetheart deals’ while the Government imposes tough austerity measures on the public.
The judicial review challenge concerns a 2010 settlement reached by Her Majesty’s Revenue and Customs (HMRC) with the US bank allowing it to avoid a multimillion-pound interest bill on unpaid tax on bonuses. UK Uncut’s lawyers argue that the government’s decision to ‘shake hands’ on the settlement breached HMRC's statutory duties and its published litigation and settlement strategies. They submit that it amounted to Goldman Sachs being ‘rewarded’ for failing to pay tax that it owed over an extended period.
However, HMRC argues that a 2012 report by the National Audit Office (NAO) backed its approach. The report stated that five big business settlements, including the Goldman Sachs deal, were ‘reasonable’ because the tax authorities were likely to have received less if they had gone to court to recover payments and lost.
UK Uncut, however, argues that irrelevant considerations were taken into account and that the agreement did not include any element in respect of national insurance contributions that had been outstanding for over five years. The settlement, it was submitted, had arisen ‘out of a tax avoidance scheme designed to avoid payment of national insurance contributions on bonuses’.
The campaign group’s legal team argues that the settlement was influenced by a desire to avoid embarrassment to HMRC officials and ministers. The exact sum lost to the revenue was not known but it was at least £5 million-£10 million and the Public Accounts Committee had received evidence that the figure might be up to £20 million. The court has reserved judgment in the case until a later date.