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HMRC slammed for ‘sweetheart’ corporate deals

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20th Dec 2011
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The Commons Public Accounts Committee this week accused HMRC managers of concealing “sweetheart” corporate tax deals from public scrutiny and breaking its own governance processes, resulting in “substantial amounts” of tax being lost to the Exchequer.

The committee's report into HMRC tax disputes accused HMRC of having a "cosy relationship" with big business, allowing them to settle tax disputes for less than the full amount due over extended timescales, while small businesses without the assistance of professional advice are denied equivalent treatment.

The basic findings of the PAC report are damning:

  1. The department’s refusal to disclose taxpayer information prevents proper scrutiny of the process for reaching tax settlements with large companies.
  2. Evidence from senior officials failed to give the committee any confidence in the way large settlements are reached.
  3. HMRC departmed from normal governance procedures in several cases, by allowing Commissioners to approve settlements they themselves negotiated.
  4. Governance procedures have lacked the independence and transparency needed
  5. to provide sufficient assurance to Parliament.
  6. Failure to comply with its own processes resulted in a substantial amount of money being lost to the Exchequer - at least £8m in lost interest on one case, and potentially more according to a whistleblower’s evidence.
  7. Top HMRC officials have not taken personal responsibility for serious errors.
  8. The department has left itself open to suspicion that its relationships with large companies are too cosy.
  9. HMRC is not being even handed in its treatment of taxpayers.

Margaret Hodge, chair of the Committee of Public Accounts, said: “This report is a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations. We uncovered both specific and systemic failures which must be addressed.”

She added: “There is more than £25bn outstanding in unresolved tax bills and it is essential that there should be proper accountability to Parliament for the settlements reached by HMRC.”

The report was commissioned to investigate the deals with Vodafone and Goldman Sachs and revealed, due to a “mistake” by HMRC, that Goldman Sachs was let off the interest of around £8m on its settlement; according to HMRC whistleblower Osita Mba, the true figure could be nearer £20m. Vodafone settled a dispute for £1.25bn when allegedly the sum should have been nearer £6bn.

The report called permanent secretary for tax David Hartnett’s evidence to the committee on his relationship with Goldman Sachs “less than clear”. The verbal exchanges in the report’s published evidence show Hartnett being evasive when challenged by the MPs on the calculations and procedures used to negotiate the deals.

The PAC report comes just days after HMRC unexpectedly announced Hartnett's resignation, which will take place in June. The report expressed concern that he settled complex tax disputes with big firms over a “significant number” of informal lunch and dinner meetings. The MPs criticised the entire department for its lack of cooperation and attempts to “avoid scrutiny of these settlements and has consistently failed to give straight answers to our questions about specific cases”.

A HMRC spokesperson said: “HM Revenue & Customs rejects the conclusion of the Public Accounts Committee that there are systemic failures in the management of tax disputes. The report is based on partial information, inaccurate opinion and some misunderstanding of facts.”

HMRC added it believed its internal process to be “robust” but plans to make “further improvements to our governance and to increase transparency”.

Treasury minister David Guake defended the department: “The government has full confidence in HMRC and its current leadership. I welcome the fact that the Department is already taking steps to strengthen its governance further, including the appointment of two new Commissioners with tax and financial expertise.”

However, the committee has called for a National Audit Office investigation into corporate tax, led by judge Sir Andrew Park. 

UK Uncut announced today it is launching legal action against HMRC for its "dismissive" response to the group's "sweetheart deal" claims. 

Replies (3)

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By Alan Ferris
20th Dec 2011 12:05

NAO

I always understood the proper authority for parliament to check HMRC was the NAO.  Is she now suggesting that the NAO is not fit for purpose or that all private tax affairs should be discussed in public by MP's?
Not a surprising outcome though, MP's are currently looking for anybody else to blame for the dire public purse than themselves.

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By Red1960
20th Dec 2011 17:21

Hartnett

 

There will always remain a cloud of suspicion around Hartnett and the truth of the matter is that he was fatally compromised by the extent and the nature of his relationship with large corporations and their advisors. He is in truth a victim of his own behaviour who has given the impression to many that he believes himself to be above the usual rules of conduct that apply to everyone else.

His evasiveness and unwillingness to provide an adequate expalantion for his behaviour whilst hiding behind the "fig leaf" of "taxpayer confidentiality" further undermined his credibility to the point at which rightly or wrongly many began to believe that he has something to hide in terms of his own competence, integrity and honesty.

So long as anyone can suggest that there is a whiff of corruption about him and he refuses to answer questions directly about that his position is fundamentally untenable.

My personal feeling is that anyone occupying his position must not only be whiter than white but must be seen to be whiter than white.Whilst questions remain as to how and why Hartnett arrived at the settlements in the Vodafone and Goldman Sachs cases that simply can not be the case.

The fact that whilst such suspicions surround him Hartnett can be quietly "retired" out of the picture with his £1.7m pension pot in tact suggests that HMRC has a very long way to go indeed before it becomes worthy of public confidence.

If I were flippant I would say that I would want a "Hartnett" settlement in all of my enquiry cases and if Vodafaone and Goldman Sachs can obtain such "favourable" treatment from HMRC then so should every taxpayer and that includes the taxi drivers with unvouched expenses aswell as the multinational with a bottomless hospitality account for Revenue dignatories.

The public will feel they have every right to be angry about this and angry about Harrtnett until they receive full and honest answers to their questions.

 

 

 

 

 

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By dstickl
21st Dec 2011 16:40

Evidence to PAC, Alan Ferris, also suggested that NAO are not...

in my opinion, any longer fit for purpose re HMRC's activities, so it's not just comment by Natalie Brandweiner that's relevant here.

Please see my 5 detailed comments on AWeb Thread “NAO to scrutinise HMRC corporate tax settlements” of Fri, 16/12/2011 onwards, especially the evidence of Osita Mba LLB (Hons), BCL (Oxon), that showed [on PAC 20 Dec’11 report page 125] that

QUOTE 3.4 First, it is significant that the C&AG restricted the scope of his examination in this manner despite the public interest disclosure I made to him and his assurances on the matter. It would appear that the C&AG, who is a prescribed person under the PIDA 1998 to whom external disclosures can be made relating to “the proper conduct of public business, fraud, value for money and corruption in relation to the provision of centrally funded public services”, has not investigated the matter I reported to him as required by the PIDA 1998 (the C&AG’s discretion under section 1(3) of NAA 1983 being explicitly “subject to any duty imposed on him by statute”) and settled principles of public law. ENDQUOTE

AND also the CPS guidance SUM UP as:

Misconduct in public office should be considered where:

there was serious misconduct or a deliberate failure to perform a duty owed to the public, with serious potential or actual consequences for the public;

there is no suitable statutory offence for a piece of serious misconduct (such as a serious breach of or neglect of a public duty that is not in itself a criminal offence);the facts are so serious that the court's sentencing powers would otherwise be inadequate; orit would assist the presentation of the case as a whole (for example, where a co-defendant has been charged with an indictable offence but the statutory offence is summary only and cannot be committed or sent for trial with the co-defendant).

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