A High Court judge has declared that the anti-cuts campaign group UK Uncut Legal Action should be allowed to take forward their case against HMRC over its decision to let banking giant Goldman Sachs off of up to £20 million in tax- owed since December 2010. This blow to HMRC comes ahead of tomorrow’s report from the National Audit Office who have been investigating five similar tax deals with as yet unnamed companies, but believed to include Goldman Sachs and Vodafone.

The case for a judicial review is being led by campaign group UK Uncut Legal Action – a spin-off organisation from the UK Uncut protest movement – and public law specialists Leigh Day & Co. It is expected that the court hearing will be in October and last five days. UK Uncut Legal Action’s case is being funded by thousands of small donations from individuals, largely raised through appeals on Twitter and Facebook.

This follows months of parliamentary scrutiny in 2011 over the way HMRC deals with the tax affairs of big business. In a report published in December 2011, the Public Accounts Committee concluded “We have serious concerns about how the Department handled some cases involving large settlements, where governance arrangements were bypassed or overlooked until it was too late.” The report also described the organisation as unaccountable and secretive, and declared that senior tax officials gave “imprecise, inconsistent and potentially misleading” evidence to parliament.

Today’s ruling gives permission to UK Uncut Legal Action to take forward a judicial review which will decide whether or not the alleged ‘sweetheart deal’ with Goldman Sachs was legal. The judge did not give permission for the group to take forwards a claim seeking to ‘quash’ or strike down the deal, and the group are consulting with their lawyers on whether or not to appeal this decision.

Murray Worthy of UK Uncut Legal Action said “We welcome the courts decision that we can take forwards our case challenging the alleged ‘sweetheart deal’ between HMRC and Goldman Sachs. The judge agreed that this case is clearly in the public interest and that HMRC have real questions to answer about the legality of this deal.”

“It is vital that these issues are addressed in court. The National Audit Office and Public Accounts Committee investigations are looking at policy issues, but this case is a question of legality and justice which only the courts can decide.”

“The public have a right to know why a multi-billion pound investment bank appears to have been let off the tax they owe while vital public services are being cut. The government is making a political choice in making ordinary people pay for the economic crisis with their jobs and pensions, rather than clamping down on billions of pounds worth of tax avoidance by big business.”

Richart Stein of Leigh Day & Co said “I am really pleased that the courts have decided that a public hearing can go ahead looking into the deal between HMRC and Goldman Sachs. We look forward to seeing the NAO report and we will re-consider how we advance the case after we have seen it.”

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(1) DETAILS OF THE TAX DISPUTE

In the 1990s, Goldman Sachs set up a company offshore in the British Virgin Islands called Goldman Sachs Services Ltd, which appears to have been designed to conceal the size of their bankers’ bonuses. Goldman Sachs also begrudged paying its share of UK national insurance on these six-figure bonuses.

The company, along with 21 other investment banks and other firms, purchased blueprints for an avoidance scheme called an employee benefit trust (EBT). It took the Revenue until 2005 for the courts to rule that these EBTs were merely illegitimate tax avoidance devices. Whilst the other firms surrendered and handed over what they owed, Goldman Sachs refused to pay its £30.81m bill.

By 2010, it is estimated that the unpaid bill with accumulated interest had mounted to £40m.

In April 2010 a judge threw out the claim from the bankers that their true employer was in the British Virgin Islands. In July 2011, HMRC’s own QC, Malcolm Gammie, gave “broadly positive” advice that the government was in a strong position to get all of its money.

However, on 30 November 2011, a high-level HMRC committee heard that their top expert, David Hartnett, had met Goldman’s tax director, Mike Housden, and as a result “a late submission had come in about a deal on which Dave Hartnett had ‘shaken hands’ with Goldman Sachs”. The government was not going to get its full £40m, but only £30m.

According to the Guardian (11 October 2011) HMRC sources privately confirm that £10m of taxpayers’ money was thrown away because of a “technical mistake” by an unidentified official, junior to Hartnett, who misinterpreted the law. They claim that the National Audit Office, which audits HMRC accounts, has accepted the situation.

(2) ‘Revenue to appear in court over Goldman Sachs ‘sweetheart’ deal’

www.guardian.co.uk/politics/2012/apr/18/hmrc-goldmansachs

(3) On 14th June the NAO will publish a report entitled ‘Tax and duties: Larger tax settlements: a follow-up report’. The review will examine the reasonableness of five of the largest tax settlements with big business.

www.nao.org.uk/publications/work_in_progress/larger_tax_settlements.aspx

(4) A December 2011 report from the Public Accounts Committee suggested HMRC risks losing “many millions of pounds” in cases where it is chasing a total of more than £25bn in unresolved tax bills because of a “too cosy” relationship with big business.

www.telegraph.co.uk/finance/yourbusiness/8966704/MPs-say-HMRC-are-too-cosy-with-the-City.html