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Goldman Sachs, Whistleblowing and HMRC – the sorry saga continues!

19 December 2011. Published by Adam Craggs, Partner

Osita Mba is a solicitor working at HMRC's Solicitor's Office.

It's a tough life being a whistleblower

He has been revealed as the 'whistleblower' who has disclosed that HMRC had not charged interest to Goldman Sachs on tax that had been agreed was payable by the bank.

Mr Mba was so concerned about HMRC's omission to charge interest that he turned whistleblower and informed the National Audit Office and two parliamentary committees of his concerns.  Mr Mba also stated that the bank's settlement had been agreed with a handshake by Dave Hartnett, the Permanent Secretary for Tax at HMRC.  Mr Mba's evidence led to Mr Hartnett being accused of lying to Parliament over his role in the Goldman Sachs' deal, which accusation he denied.

HMRC have launched an investigation into Mr Mba's conduct which could lead to him being dismissed or even prosecuted for disclosure of sensitive information.

The whistleblowing legislation

The law relating to whistleblowing is complicated. In a nutshell, the Public Interest Disclosure Act 1996 ('PIDA') provides protection for workers, who report malpractices by their employers, against victimisation or dismissal.  In order to qualify, the whistleblower must make a 'qualifying disclosure,' relevant to one of six types of 'relevant failure' and must have reasonable belief that the information disclosed tends to show one of these failures.  The disclosure must also be a 'protected disclosure' which broadly depends on the person to whom the disclosure is made. PIDA encourages disclosure to the worker's employer and disclosure to third parties are only protected if more stringent conditions are met.

In terms of what 'relevant failure' may have been involved, we anticipate, although we do not know, that Mr Mba would have disclosed information on the basis that there had been a breach of legal obligation by HMRC in reaching the deal it did with Goldman Sachs.

In terms of the disclosure to a third party, the employee must demonstrate that he acted in good faith, reasonably believed that the information disclosed was substantially true, must not have acted for gain and must either have previously disclosed substantially the same information to their employer or reasonably believed, at the time of the disclosure, that they would be subject to detriment by their employer if they made disclosure. Certainly, from HMRC's present actions, Mr Mba may have little difficulty in demonstrating that he would have been subject to detriment had he told his employer at the time of his intentions.

The plot thickens

It now emerges that the Public Accounts Committee has been considering a new claim by Mr Mba that HMRC has acted ultra vires, in that the deal reached with Vodafone, in July 2010, includes estimates of future profits for the company for the years 2011 and 2012.  If this is correct, the deal with Vodafone covers years for which the company's profits could not be known and therefore this agreement may be outside of HMRC's legal powers (readers may recall that a similar issue arose in Al Fayed v Advocate General of Scotland [2004] STC 1, where it was held that forward tax agreements were beyond HMRC's powers and unlawful).  It what may be an unconnected development, it has  been announced that Mr Hartnett will retire in the summer of next year.

Where now?

There has been increasing public concern over the way HMRC have concluded deals with certain large corporates in recent years. The Goldman Sachs's deal has raised a number of difficult issues for HMRC which need to be addressed.  Future tax settlements with large corporates will have to be scrutinised very carefully and decisions taken on a case by case basis as to whether or not they are lawful.  Public perception is critical, one class of taxpayer, the large corporates, cannot be seen to be receiving more favourable treatment than others.  The saga will no doubt rumble on.  Where all this will leave Mr Mba is uncertain but many may find it surprising to learn that HMRC wish to censure an employee who has brought important information relating to HMRC's settlements with large corporates to the attention of Parliament and the British tax paying public.