HMRC’s top tax official told MPs yesterday that he was very sorry that HMRC made a ‘mistake’ resulting in no interest being charged on national insurance contributions payable by Goldman Sachs following the failure of an avoidance scheme.
The Commons Public Accounts Committee (PAC) met to discuss HMRC’s accounts. But the meeting was dominated by the Goldman controversy as MPs vented their frustration over Dave Hartnett’s continued refusal, on the grounds of taxpayer confidentiality, to discuss the bank’s tax affairs.
Hartnett, HMRC’s Permanent Secretary for Tax (pictured), denied lying to MPs on the Treasury Committee last month when he told them: ‘I do not deal with Goldman’s tax affairs’.
He said the interest forgone was less than the £10m suggested in press reports, but he was unable to give the true figure. Margaret Hodge, the committee’s chairman, said it was ‘deeply irritating’ that HMRC was ‘hiding behind confidentiality on a case in the public domain’.
Amyas Morse, the Comptroller & Auditor General, told the committee that the erroneous belief that interest was not applicable may have cost the Exchequer between £5m and £8m.
Hartnett accepted that HMRC had discretion to disclose information for the purpose of ‘its functions’. One of HMRC’s functions, Richard Bacon argued, was to account to Parliament for effective administration of the tax system. In certain cases, disclosure could be required.
Hartnett said public interest and similar issues were set out clearly in the Commissioners for Revenue and Customs Act 2005 s 18. HMRC’s view, based on legal advice, was that it was prevented from disclosing taxpayer information.
He accepted, after some discussion, that one of HMRC’s functions was to ‘assist Parliament’. But he argued that there was ‘no specific gateway that enables the disclosure of the information to Parliamentary committees’.
His advice was that ‘any HMRC official disclosing specific taxpayer information to a committee is in jeopardy of committing a criminal offence’.
The Guardian suggested yesterday, referring to a discussion held in 2009, that ‘leaked legal advice’ contradicted earlier advice that disclosure would be illegal. But the note of that discussion stated that it would be ‘difficult to identify an example where it would be necessary for HMRC’s functions to disclose taxpayer identifying information to the PAC’.
The note continued: ‘In any case, we sought legal advice from First Treasury Counsel. He advised that as PAC are a Parliamentary body with an oversight role over HMRC it follows that HMRC’s functions would extend to assist PAC with that oversight role. So there is no absolute bar on disclosure but this would still be at HMRC’s discretion and wrongful disclosure would still be a criminal offence.’
It went on to say that Counsel was of the view that Parliamentary privilege would be ‘unlikely’ to provide protection to an HMRC official charged with such an offence.
Hartnett told the PAC that he was asked to attend a meeting with Goldman in November 2010 because the relationship between the bank and HMRC had become ‘difficult’. But he had ‘no deep knowledge’ of Goldman’s tax affairs and did not reach a settlement on his own.
Hodge said a note of a meeting held in the offices of HMRC’s lawyers on 8 December 2010 – also published by The Guardian – stated that Hartnett had ‘shaken hands’ with Goldman Sachs on a settlement.
But Hartnett told the PAC that Hansard would demonstrate that he did not mislead the Treasury Committee.
He had told that committee that ‘there was an issue in relation to which a mistake was made, because we saw [a legal] impediment to dealing with an issue’. In fact the impediment had been removed, he said, ‘but a number of us at the meeting did not know that’.
An ‘uncorrected transcript’ of Hartnett’s exchange with Jesse Norman on 12 September is available on the Parliament website.
At that meeting, asked whether he had received corporate hospitality from Goldman, Hartnett said he had attended a supper. ‘I went with a managing director from the Treasury to talk to about 20 chief finance officers from FTSE 100 companies about developments in tax policy and tax administration.’
Norman asked: ‘Was any dispute with Goldman outstanding while you had this experience?’ Hartnett replied: ‘I knew nothing of Goldman’s tax affairs when I was at that supper. I do not deal with Goldman’s tax affairs.’
Hartnett told the PAC yesterday: ‘I met Goldman on a similar occasion, on 19 November 2010. I had been asked by two of my colleagues to assist them with a difficult relationship issue.’
He had never dealt with the group’s affairs on a routine basis, he said. ‘We reached a settlement on a number,’ he said. He confirmed later that he was one of two Commissioners who signed off the settlement.
Bacon pointed out that less than a year before his statement to the Treasury Committee Hartnett had been in a meeting where ‘he dealt with Goldman’s tax affairs’. It would have been more accurate for him to tell the Treasury Committee that he had been involved occasionally, Bacon said.
Hodge asked Hartnett whether the taxpayer had been ‘ripped off’. ‘Absolutely not,’ Hartnett said. ‘A mistake was made.’
Bacon asked Hartnett whether HMRC had warned Goldman that interest would be charged if the bank continued to ‘resist’. Interest was ‘always in our mind’, Hartnett said, but he declined to answer the specific question, again because of taxpayer confidentiality. Bacon went on to say that HMRC did warn Goldman, in 2005, that it would be liable for interest.
‘There was no wave of the hand,’ Hartnett said. He had spotted the mistake and taken it to HMRC's general counsel.
An HMRC spokesman told Tax Journal today: ‘Dave Hartnett’s long career in the tax service has been built on ensuring the right tax is paid by large businesses and individuals alike so he does not do “sweet-heart” deals. Dave is taking forward the government’s drive against fraud and evasion having achieved ground breaking tax agreements with Liechtenstein and Switzerland whilst driving up our overall compliance yields.’
