Taxman's 'cosy' deals with big business

Tax chiefs are today savaged by MPs for their “unduly cosy” relationship with large companies following allegations that major firms had billions of pounds cut from their tax bills in “sweetheart deals”.

The Commons public accounts committee accused senior managers at HM Revenue and Customs (HMRC) of trying to cover up the generous agreements when quizzed over the details.

Its scathing verdict came as the pressure group UK Uncut prepares to launch a High Court action calling for some of the lost cash to be paid and for secret documents detailing the agreements to be released.

The committee's report follows widespread criticism of two deals struck by officials led by Dave Hartnett, the HMRC’s permanent secretary for tax.

The merchant bank Goldman Sachs ended up paying less tax than was due because of a “mistake” admitted by HMRC. It put the potential cost to the taxpayer at £8m, but the committee heard from a whistleblower that the loss could be as high as £20m.

Vodafone is alleged to have been allowed to pay £1.25bn in a tax dispute with the Government, despite a potential bill of £8bn.

A judge-led inquiry will also examine several other HMRC agreements that saved unnamed companies large amounts of money.

In a dramatic Commons hearing two months ago, MPs repeatedly accused Mr Hartnett of lying when challenged over the details of the Goldman Sachs deal.

He has since announced his retirement in the summer, but denies his departure is linked to the storm over the corporate tax payments.

The PAC said: “We are concerned about the perception that the department has an unduly cosy relationship with large companies it is trying to settle tax disputes with.”

It pointed to the 107 occasions over a two-year period that Mr Hartnett had lunch or dinner with companies, tax lawyers and tax advisers without minutes of the meetings being taken.

The MPs complained it was “clearly unacceptable” that in some cases the same officials both negotiated and approved the settlements – and said Mr Hartnett’s evidence over his relationship with Goldman Sachs was “less than clear”.

They said the Goldman Sachs deal was done “without legal advice” or an official note of the meeting, with HMRC officials relying on the firm’s records and suggested senior staff should have been penalised for the mistake that led to the agreement.

The MPs were damning about the quality of evidence from officials during bruising encounters with the committee, as well as the HMRC’s culture of secrecy.

It protested that its investigation of the Goldman Sachs agreement was inhibited by the “imprecise, inconsistent and potentially misleading answers” it received from officials, including Mr Hartnett.

“The department has made matters worse by trying to avoid scrutiny of these settlements and has consistently failed to give straight answers to our questions about specific cases,” they said.

The committee dismissed the HMRC’s argument that details of settlements should remain confidential – and said it was absurd that information had only reached the public domain through the media and a whistleblower.

The committee’s chairman, Margaret Hodge, said: “This report is a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations.

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

The Tory MP Richard Bacon, a committee member, said: “HMRC has succeeded in creating the impression it takes a softer approach to large and powerful firms while being tougher on small businesses. Whether accurate or not, this notion is toxic for HMRC’s relationship with the vast majority of taxpayers.”