Despite what was hailed as a broadly positive National Audit Office report, Dave Hartnett and his HMRC sidekicks Lin Homer and lawyer Anthony Inglese may not quite be out of the woods yet, thanks to the persistence of the House of Commons Public Accounts Committee, which commissioned the NAO report in the first place.
Problems centre on the deal struck between Mr Hartnett and Vodafone, and discrepancies in the accounts of the process of agreeing the deal given to the PAC and unearthed by the NAO. In response to suggestions that Vodafone had been let off lightly with a £1.25 billion settlement over 5 years in respect of a less than robust tax avoidance scheme, Messrs Hartnett and Inglese have assured the PAC on multiple occasions that “lawyers were involved throughout” the case.
Unfortunately for them, Sir Andrew Park’s NAO report stated that HMRC “did not seek legal advice on whether the (Vodafone dispute) should be settled, or on the terms on which it should be settled. Lawyers were not involved throughout the settlement negotiations”. Given that Inglese (a lawyer, I remind you) made his assertions on oath, his life could be about to become somewhat difficult from a professional standpoint.
Ms Homer also stretched the credulity of the PAC when she sought to back up Mr Hartnett’s assertion that “we did not collect a penny less from Vodafone than we thought we could”, which runs contrary to the NAO finding that the deal was “lower than the tax liability that would have been established if the department won in litigation.” Now there is such a thing as litigation risk (i.e. HMRC might have lost the case) and thus to accept in the process of negotiation a lower amount than the maximum available with a victory in court is not necessarily unreasonable.
Ms Homer’s statement in support of her boss was “we do not settle for a lesser amount than we believe we would reasonably expect if we litigated”, which goes rather further than what Mr Hartnett said, and frankly flies in the face of both my experience of negotiation with HMRC and the practicalities of negotiation; why would any taxpayer pay up the full amount at stake in tax litigation without litigating? As Margaret Hodge, chair of the PAC, put it very succinctly:
“You don’t take legal advice and then you tell me to believe that you think you will lose the point in litigation. It Is an incredible position.”
This one, as they say, will run and run…..