UK tax department accused of facilitating sweetheart settlements

Four corporations that settled tax deals worth £4.5 billion with the UK tax department, are among those let off lightly.

This was disclosed in a document sent by the ex-head of tax at HM Revenue & Customs (HMRC), Dave Hartnett, to the exchequer secretary at the Treasury.

The scale of the government's "sweetheart" tax deals – individual secret agreements agreed between tax officials and corporations for settlement of disputes could be revealed for the first time after documents not seen before showed that just four settlements were worth £4.5 billion between them.

The figure was disclosed in a leaked document sent by Harnett, to David Gauke, the exchequer secretary at the Treasury. It was not revealed before on the grounds of preserving "taxpayer confidentiality".

According to the document, deals over £1 billion were "not uncommon". MPs and tax campaigners have seized upon the figure to press for release of release details of how much tax was owed by each of the four unnamed companies with which the deals were struck.

Margaret Hodge, the chair of the Commons public accounts committee, said, it the government got £4.5 billion in, taxpayers would want to know how much did the government not get.

She said she would be raising the matter with HMRC through the committee.

Meanwhile, a court was told yesterday, that HMRC approved a deal with Goldman Sachs partly as the US bank was threatening to pull out of a new tax framework, which would have embarrassed the government.

Activist group UK Uncut Legal Action has called on the High Court to declare that the 2010 settlement between Goldman and the tax authority (HMRC), worth up to £20 million to the US bank, was unlawful.

The action follows public anger in the UK over how big firms were getting away with paying less tax than many ordinary people hit by a stagnating economy and government spending cuts.

Goldman Sachs' image meanwhile was at risk of taking a further beating in the UK after a public outcry in January forced it to scrap plans for delaying payment of bankers' bonuses to make the most of an income tax cut for high earners.

In financial terms, the disputed $30 million would be small change for a bank that paid its employees $12.9 billion in compensation and benefits last year.

The case involves a deal entered into by the then HMRC boss Dave Hartnett and Goldman Sachs in November 2010 to close a long pending case over a now-banned tax avoidance scheme that involved payment of bonuses to UK staff via an offshore tax haven.

While other banks that had been using the scheme settled with HMRC in 2005, Goldman Sachs continued to resist what HMRC said it owed for a further five years.

The court was told by Ingrid Simler, a lawyer representing UK Uncut Legal Action, that Hartnett wrongly agreed that Goldman Sachs should pay the principal it owed but not the interest that had accrued over those five years.