Taxman ‘helped big business avoid bills and cost public purse millions’

TAX chiefs face a mauling by MPs today over accusations they bent rules to do favours for big firms at a cost of millions of pounds to the taxpayer then hid the details from a watchdog.

Calling for senior officials to face punishment for a series of costly errors and failures, the public accounts committee warned that procedures should be tightened.

Its report called for safeguards to be put in place to avoid the impression that HM Revenue & Customs (HMRC) enjoyed an “unduly cosy” relationship with major companies.

And the MPs demanded explanations of why officials wrongly claimed that they could not discuss deals with the committee and gave “inconsistent and potentially misleading” answers.

The report represents the conclusions of a fiery public inquiry by the committee which at one point saw Dave Hartnett, permanent secretary for tax – the head of HMRC – accused by the chairwoman of lying.

The National Audit Office has now appointed a former judge to investigate.

Mr Hartnett, who is to retire next summer, has admitted that an error led him to sign off on one tax avoidance dispute.

Banking giant Goldman Sachs was allowed to skip a multi-million-pound interest bill on unpaid tax on bonuses after Mr Hartnett said he was wrongly advised there was a “legal impediment” to collecting it.

The potential cost to the taxpayer has officially been put at £8 million, but the committee was given evidence from a whistleblower that the sum could be as high as £20m.

In their report, the MPs expressed astonishment that HMRC “chose to depart from normal governance procedures” by allowing the same senior officials to both negotiate and approve such deals.

Worse, it said, the Goldman deal was done “without legal advice” or an official note being taken of the meeting, with officials relying on the firm’s records.

And no good reason had been given for why the deal was not halted when the error was found, the MPs said.

They also expressed concern that a whistleblower who exposed the case may have been harassed.

Noting that Mr Hartnett alone had enjoyed 107 dinners and lunches with companies, tax lawyers and advisers over two years, the MPs raised concerns that relations could seem “unduly cosy”.

While such contact was undoubtedly necessary to the role, their report concluded, HMRC paid insufficient attention to whether there could appear to be conflicts of interest.

It was unfair that big operations were given discounts and more leeway in deadlines for repayment than were available to smaller outfits and individuals, the report said.

Committee chairwoman, Labour MP Margaret Hodge, said: “This report is a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations.”