The head of HM Revenue & Customs (HMRC) is to be quizzed by MPs this afternoon over claims he allowed Goldman Sachs to escape £10m in interest payments on an offshore tax avoidance scheme.
Leaked documents allege that Dave Hartnett, the permanent secretary for tax at HMRC, personally approved the agreement with the Wall Street bank last December.
The UK government had been seeking a settlement regarding more than £30m in back taxes it said Goldman owed. Including interest, this amounted to about £40m, according to the Guardian newspaper.
However, it is alleged that, thanks to the deal negotiated with Hartnett, Goldman was able to pay just the accrued taxes and avoid the £10m interest payment.
HMRC strongly disputes the charges, but Hartnett will be questioned today by the Commons Accounts Committee.
It follows attempts by the government to seek back taxes from a group of 22 financial firms in 2005 after uncovering a scheme to route bonuses through offshore entities in an alleged bid to avoid taxes.
In Goldman's case, it set up an offshore company in the British Virgin Islands in the 1990s - Goldman Sachs Services Ltd.
All of the companies but Goldman settled, leading to a drawn-out legal battle between the UK government and the Wall Street bank.
In a statement to the Guardian, HMRC said that the picture painted was incomplete and "flawed".
A spokesperson added: "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. HMRC does not do 'sweetheart' deals."
Goldman Sachs declined to comment.
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