If only we could have “Sweetheart” deals!

The following is an extract from an article about “Sweetheart” deals appearing today in economa, the ICAEW members magazine.

The Tax Assurance Commissioner at HMRC has issued his first report about the large deals done with taxpayers under the new approach established by the department in the wake of the sweetheart deal furore

Edward Troup, who oversees settlements in sensitive tax disputes and gives final approval alongside two independent commissioners, reveals that in the first six months of the new procedure the Tax Disputes Resolution Board referred 22 cases to the commissioners for a decision.

Of those, 11 proposals by taxpayers, with an overall value of £1,368m, were accepted and a further six proposals worth £285m were accepted with conditions. The remaining five proposals worth £398m were thrown out.

“The oversight of large settlements, and scrutiny of the processes, allows me to provide assurance that we do consistently achieve the correct tax outcomes for the exchequer under the law,” Troup said.

In April, a leaked memo between Troup’s predecessor Dave Hartnett and Treasury exchequer secretary David Gauke revealed that the government had settled for £4.5bn from a series of four “sweetheart” tax deals. It also suggested that £1bn as a settlement was not out of the ordinary.

This stoked up the public outrage that had been aroused over the revelation of a secret deal HMRC did with Goldman Sachs over a failed tax avoidance scheme involving the payment of bonuses to UK staff via offshore tax havens.

Other banks had used the scheme but only Goldman refused to settle in 2005. It was agreed in 2010 that Goldman should pay the principal it owed but not the interest gained over the five years. Estimates put the amount of saving Goldman made thanks to the deal at between £8m (HMRC) or £20m (campaigners UK Uncut).

In February, HMRC announced a series of changes designed to improve transparency and strengthen its governance of significant tax disputes, including greater transparency about the decision-making processes for tax disputes through a new code of governance.

When the code was published, Troup made it clear that while HMRC was committed to greater transparency about the way it worked, this would always be subject to the over-riding legal obligation to preserve taxpayer confidentiality. As a result, none of the taxpayers involved in the 22 case referred to in the commissioner’s report are named.

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