UK High Court rules Goldman Sachs tax deal lawful 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 Legal Action , 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. 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. 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. 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." Responding to the court judgment, Anna Walker, campaigns director of UK Uncut, 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." 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 UK Uncut UK Uncut had argued that because HMRC had a published litigation and settlement strategy, it was obliged to follow it to ensure fairness to all taxpayers. Lawyers for the campaign group argued that the Goldman deal infringed this guidance because it was a "package deal" which traded a promise to pay all national insurance contributions for HMRC's promise to forgo interest on those contributions. UK Uncut argued that Goldman had gained an advantage over companies which settled with HMRC in 2005 and retained the money which was due to the Revenue for another five years without having to pay interest. The judge noted in his ruling that HMRC's relationship with Goldman had been "uneasy." But he also referred to a witness statement from Melanie Dawes, former director-general for business tax within HMRC. In it, Ms Dawes said: "I would also have been conscious that going back on the settlement and provoking a dispute with Goldman Sachs had the potential to damage HMRC's reputation more widely thereby making other customers more reluctant to reach agreement with HMRC." The judge concluded that despite reference to the potential embarrassment to the chancellor of the exchequer, the decision by HMRC to do the deal with Goldman would have been the same. "On all the evidence, I should conclude that the decision would inevitably have been the same even without this immaterial consideration," he said. Jim Harra, HMRC's director-general for business tax, welcomed Thursday's ruling. "The High Court's comprehensive dismissal of UK Uncut's claim puts to rest the fallacy that HMRC is soft on large businesses," he said. HMRC has an exemplary record in relentlessly challenging those who avoid tax. We have recovered £34bn in additional revenues from large businesses in the last seven years. The High Court's judgment confirms what HMRC has always said: that while we made errors in settling the Goldman Sachs dispute, we made the right settlement in the circumstances, and that our decision was both proper and lawful.