- HMRC's High Risk Corporate Board Programme recommended that the agreement be rejected
- Hartnett by his own admission "took into account the potential embarrassment to the Chancellor of the Exchequer
- Hartnett added that tax authorities were "extremely worried" that reneging on the Goldman agreement "would -significantly damage the relationship"
A "sweetheart" tax deal between HM Revenue & Customs and Goldman Sachs which let the investment bank off paying interest was lawful, the High Court has ruled.
Mr Justice Nicol dismissed a legal challenge brought by UK Uncut , the tax campaign group, over HMRC and Goldman's settlement of a lengthy tax dispute.
However the judge found that the settlement "was not a glorious episode in the history of the Revenue."
A court hearing earlier this month heard that in a November 2010 meeting at the bank's London offices, David Hartnett, then permanent secretary to HMRC, shook hands on a deal that waived interest penalties of up to £20m on offshore bonus payments made to Goldman staff.
In his ruling, Mr Justice Nicol noted that HMRC did not appear to have taken a contemporaneous note of its oral agreement with Goldman Sachs about the deal when it was struck in November 2010.
He also found that Mr Hartnett by his own admission "took into account the potential embarrassment to the Chancellor of the Exchequer if Goldman Sachs were to withdraw from the Tax Code" -- a code of anti tax avoidance practice which banks, including Goldman, had just signed up to.
He added: "HMRC accepts that this was an irrelevant consideration and should not have featured in his decision making".
HMRC's High Risk Corporate Board Programme, which reviews corporate settlements, recommended that the agreement be rejected, the court hearing had been told.
According to an email from Mr Hartnett contained in court papers, Goldman "went off the deep end at the [board's] suggestion that they should pay interest".
Mr Hartnett lobbied for the settlement, writing to a colleague that "the risks here are major embarrassment to the ChX [Chancellor of the Exchequer], HMRC . . . you and me, not least if [Goldman] withdraw from the code", the court was told.
Goldman's deal was approved on December 9 2010.
In a witness statement lodged with the court, Mr Hartnett added that tax authorities were "extremely worried" that reneging on the Goldman agreement "would -significantly damage the relationship" and "may lead to Goldman being more aggressive in their relationship with HMRC which could result in lower tax payments in the future".
Mr Hartnett also said that Goldman regarded the settlement as "final" and "would fight any attempt by HMRC to [cancel] it".
Responding to the court judgment, Anna Walker, campaigns director of UK Uncut Legal Action, which brought the judicial review, said: "Obviously while we are deeply disappointed that this deal has not been declared unlawful, the judge's ruling that top HMRC officials played politics with major tax deals to protect Osborne's reputation is a major victory in exposing the truth behind these secret deals."