HMRC chief under pressure to quit over Goldman Sachs tax let-off

Top official admits error but denies lying to MPs after bankers avoided multimillion pound bill

Britain's top Inland Revenue official faced demands last night to quit after being accused of lying over a deal that spared Goldman Sachs a multimillion pound tax bill for its bankers' bonuses.

Dave Hartnett, permanent secretary for tax at HM Revenue & Customs (HMRC), apologised for a "mistake" that allowed the Wall Street institution to avoid paying interest after settling a five-year legal dispute with UK tax authorities. But he denied lying to MPs.

Mr Hartnett faced a barrage of hostile questions yesterday from the Commons Public Accounts committee.

Its chairwoman, Margaret Hodge, repeatedly accused him of lying to the Treasury Select Committee – which he last month told that he "did not deal" with the tax affairs of Goldman Sachs.

"I did not lie," Mr Hartnett said yesterday. He insisted he had no daily involvement with the bank's affairs.

However, she quoted minutes of an HMRC lawyers' meeting that said Mr Hartnett had "shaken hands" on a settlement he brokered with three Goldman Sachs executives last December.

Mr Hartnett said he became involved only because the relationship between other HMRC and bank representatives had broken down.

But he insisted: "I did not do a deal personally. I did not waive interest away." He added: "I have no recollection of shaking hands... A mistake was made, for which I am very sorry and my colleagues are very sorry."

He took responsibility for the error but said no one had been disciplined.

"The mistake was made by a number of people and we have made sure that a mistake like that can't be made again," he said.

Last night Jesse Norman, a Tory MP on the Treasury committee, said Mr Hartnett should resign and added: "This settlement with Goldman Sachs is the last straw. He [Mr Hartnett] strongly implied he was not involved in the Goldman Sachs case. He told me the Revenue never charged less than the tax owing. The... case shows this to be false."

Challenged by Mrs Hodge whether the taxpayer was "ripped off" by £10m in the deal, the HMRC chief replied: "The sum was smaller than that."

When he refused to divulge how much on grounds of "taxpayer confidentiality", Mrs Hodge accused him of "hiding behind" the rule in an "outrageously unprecedented" way. He insisted he was acting on legal advice.

Amyas Morse, head of the National Audit Office spending watchdog, estimated the loss at £5m to £8m.

Another 20 firms who used a similar tax avoidance scheme caved in after a court ruling but Goldman Sachs refused to pay its £30.81m bill, which rose to £40m when interest mounted.

Minutes of the HMRC lawyers' meeting, leaked to Private Eye magazine, cited the "difficulty" senior figures had in accepting the no-interest deal.

Mrs Hodge quoted the HMRC's Anthony Inglese saying he "would always want to assist Dave Hartnett, but not if this were unconscionable".

The HMRC head admitted meeting bank executives for lunch and supper but said he had "no idea" about the dispute at the time.