Goldman Sachs let off £10m tax avoidance scheme interest payment

Leaked documents reveal that Christmas came early to Goldman Sachs last year after HMRC let the company off paying the £10 million interest it owed on a tax avoidance scheme.

Dave Hartnett, the permanent secretary to HMRC, met with the Wall Street bankers last December and agreed to write-off the £10 million.

Accountants in London are probably aware that Goldman had been trying to get out of paying national insurance contributions on the huge bonuses it paid its London bankers. £10 million is small change to the Wall Street company that paid out £9.5 billion in salaries and bonuses last year. During the height of the UK’s banking crisis, 100 of Goldman’s London partners restrained their bonuses at £1 million each.

Goldman set up an offshore company in the British Virgin Islands in the 1990s. The company, Goldman Sachs Services Ltd, was supposed to employ the London bankers, who were “seconded” there. This is thought to have been designed as a way of keeping data about the bank’s accounts and payroll confidential and away from the public domain.

The Wall Street Bank was not the only company to indulge in avoidance schemes. A further 21 investment banks and other companies set up employee benefit trusts whereby employee bonuses were invested in complicated share option schemes.

HMRC eventually managed to convince the court that these EBTs were illegitimate tax avoidance schemes, but it took them until 2005 to do so. The 21 other businesses surrendered, and paid what they owed.

Goldman Sachs received a bill for £30.81 million but refused to pay up. By 2010, the debt had increased to £40 million with the accumulated interest. It was thought that the government would eventually receive all of its money but then came the news that Hartnett and Goldman Sachs had shaken hands on the deal to reduce the debt back to £30 million.

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