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UK Internal Revenue Lawyer Probed Over Goldman Sachs Tax Deal

Megan Murphy and Vanessa Houlder, Financial Times

British MPs took the extraordinary step of interviewing Revenue & Customs’ top lawyer under oath as a row over an alleged “sweetheart” tax deal offered to Goldman Sachs, the Wall Street investment bank, intensified.

Big Ben
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Anthony Inglese, the Revenue’s general counsel, was asked to give evidence under oath before a hearing of the Commons public accounts committee on Monday after MPs became frustrated over his failure to answer questions about the Goldman case, which related to a long-running dispute over unpaid national insurance contributions.

Dave Hartnett, the Revenue’s top tax official, and other senior officials have been under mounting pressure to explain why the department failed to include interest in that settlement, which is estimated to have cost the taxpayer as much as £10 million in lost tax receipts.

While parliamentary committees have long held the authority to require witnesses to testify under oath, it is a power that is hardly ever used. When Rupert and James Murdoch appeared before the culture, media and sport select committee in July to discuss the phone-hacking scandal at the News of the World, for example, they were not required to swear their evidence under oath, in spite of the high-profile nature of the case.

MPs on Monday accused Mr Inglese and Mr Hartnett of failing to take proper legal advice on the Goldman settlement before it was agreed, in an at times heated hearing.

Both men repeated their position that the Revenue mistakenly believed that there was a “legal impediment” to charging interest on the unpaid bill, and decided against reopening the deal once the error was uncovered.

While 21 other large investment banks settled with the Revenue in 2005 over their use of offshore structures known as “employee benefit trusts” to avoid national insurance contributions on bankers’ bonuses, Goldman pursued the case for five years before also opting to settle.

Mr Hartnett told the committee that the Revenue employee who made the interest mistake had had their bonus docked as a result.

“This the biggest ad for Goldman Sachs, because they toughed it out, and they got the interest taken off,” Margaret Hodge, chair of the public accounts committee, said. “If I was sitting there at Goldman Sachs, I’d be sitting there rubbing my hands.”

Sir Gus O’Donnell, head of the civil service who also appeared before the committee on Monday, mounted a vigorous defense of Mr Hartnett, saying the approach to large settlements adopted by the Revenue had resulted in a large increase in revenues and saying that his work on tax evasion had brought in billions of pounds. He said: “We are in a less bad situation than we would have been.”

Allegations that Revenue & Customs inappropriately waived Goldman’s interest bill sparked a march last month from the OccupyLSX encampment outside St Paul’s Cathedral to Parliament Square to demand Mr Hartnett’s resignation.

Asked by Mrs Hodge whether he had considered his position, Mr Hartnett said: “I have work to do. I have no plans to resign.” He said there had been reputational damage to the Revenue because of what had been written about the matter which was “seriously incomplete”.