“I DO not deal with Goldman’s tax affairs,” tax boss Dave Hartnett told the treasury select committee last month as MPs tried to question him on how the US bank had been let off around £20m interest when it settled a dispute over a scheme to avoid national insurance on bankers’ bonuses.

But that is not what is shown by internal HM Revenue & Customs documents, Private Eye can now reveal. 

After Hartnett, HMRC’s top taxman, had personally agreed the deal late last year and presented it as a fait accompli to the “high risk corporates board” that is supposed to approve these matters, the department’s unimpressed lawyers hastily convened in the Whitehall office of HMRC general counsel, Anthony Inglese.

Shake hands
Minutes from this meeting, on 8 December, reveal that “at the high risk corporates committee meeting the previous week a late submission had come in about a deal on which DH [Dave Hartnett] had ‘shaken hands’ with GS [Goldman Sachs]”.

Disquiet centred on the fact that 21 other companies with similar tax avoidance schemes, dating back to 1997/98, had coughed up back in 2005. In return for not taking their cases to court, these companies had not been charged interest.

Goldman had hung out for another five years, however, on the technicality that HMRC had incorrectly charged the company its bankers worked for, Goldman Sachs International, not the British Virgin Islands company, Goldman Sachs Services Ltd, that legally employed them.

‘No additional penalty’
By the time the bank lost the technical point in a tax tribunal last year, it should have received a national insurance bill for more than £23m plus interest going back 12 years and approaching the same amount again. Instead, noted the lawyers, it was “clear that the proposed settlement gave GS no additional penalty for having resisted for five more years, including as [the case lawyer] explained raking every conceivable point in the tribunal, and putting up a ‘stooge’ witness when Mr Housden [Goldman’s managing director in charge of the scheme] was the obvious person to answer questions”.

Five years’ free money
HMRC had strong advice from leading tax silk Malcolm Gammie that it would recover the dodged national insurance if it went to court, which meant that under its own “litigation and settlements strategy” it must “not reach an out of court settlement for less than 100 percent of the tax and interest at stake”.

Not only did the interest-free deal breach this rule, it also gave the bank five years’ more free money, and thus a better deal, than those who had played ball. Small wonder that Inglese, record the minutes, “referred to the difficulty all those present at this meeting were having in justifying a settlement without an interest element”.

The least deserving cause imaginable
That the country’s top taxman, already in the firing line over Vodafone’s dodgy deal (see Eyes passim ad nauseam), could give a sweetheart deal to Goldman Sachs on a scheme to avoid tax on bankers’ bonuses – possibly the least deserving cause imaginable – speaks volumes for the administration of big business’s tax obligations..

The public accounts and treasury select committees have been trying to fathom it, to little avail. Last month Tory MP Jesse Norman ventured: “There has been a deal done with Goldman, I think I am right in saying, in which they were…” Hartnett swiftly cut him off: “I am really sorry, but I cannot talk at all about a specific taxpayer. To make sure I could not do that, twice in the last ten days I have been to see our most senior lawyers to see whether there was anything I could say about the newspaper reports on this, and they have said no.”

Oddly the same lawyers did allow him to talk about reports of the Vodafone case that he wanted to dismiss earlier this year. But then Inglese is an amenable cove. “AI said he would always want to assist DH,” record those minutes again, “but not if this were ‘unconscionable’.” Quite how the unconscionable Goldman deal eventually went through formally is not clear, but the Eye understands it did.

PS: Inglese, boasts his CV, “leads on professionalism and ethics for the Government Legal Service and is a bencher at Gray’s Inn and a member of the Bar Standards Board. He also gives training at the National School of Government.” What a case study Goldman’s tax bill would make.