It has been revealed that good old Goldman Sachs received one rather large Christmas present in the form of unpaid interest from Her Majesty’s Revenues and Customs, following a long legal battle over one of the US bank’s tax avoidance schemes.

It has been reported that Goldman and a host of other banks avoided paying British national insurance on bonuses in the 1990s by setting up “companies” in offshore tax havens.

Offshore tax havens have long since been a way for companies and individuals to avoid paying tax on certain things, but, the problem here is that Goldman’s employees were offshore themselves, in London and other parts of the world, and so therefore should have been paying the tax.

Documents obtained by the Guardian say that Britain’s top tax official, and HMRC’s permanent secretary, Dave Hartnett, personally shook hands on a secret deal last December.

There was previously an argument that such information would not have to be revealed to the British parliamentary watchdog, the Commons public accounts committee, but leaked legal advice from James Eadie QC, said the opposite.

And as such, the committee will question Mr Hartnett today.

It’s probably fair to say he didn’t have a good night’s rest, because if the leaked legal advice is true, Hartnett will be in a spot of bother because he also refused to give the facts about Goldman Sachs to MP Jesse Norman on the Treasury committee last month, claiming disclosure would be illegal.

He has also refused to brief ministers on the details of what actually happened last December.

That same legal council advised the HMRC board in 2009 that Hartnett, at his own discretion, was actually free to disclose the information to parliamentary committees.

The issue itself stems from numerous bonus payments that originate from the offshore scheme over a lengthy period of time and an on-going legal battle Goldman has been fighting with HMRC to avoid paying the tax.

Judge David Williams said back in 2009 that it was:

A way of keeping information about the GS accounts and payroll out of the public domain and confidential.

According to the Guardian:

The company, along with 21 investment banks and other firms, purchased blueprints for an avoidance scheme called an employee benefit trust (EBT). The bonuses were indirectly invested into elaborate share option schemes.

It took the Revenue until 2005 to demonstrate in court that these EBTs were merely illegitimate tax avoidance devices. The 21 other firms surrendered, and handed over what they owed. But Goldman Sachs refused to pay its £30.81m bill.

Instead the city firm Freshfields and the tax QC David Goldberg fought tooth and nail on Goldman’s behalf through the courts. By 2010, according to a public judgment, the unpaid bill with accumulated interest had mounted to £40m.

Hartnett better have his ducks in a row when he walks into that meeting this morning.

[Source: Guardian]