HC 1531 Public Accounts CommitteeFurther written evidence from the Permanent Secretary for Tax, HMRC

Information Requested at PAC Hearing, 7 November 2011: HM Revenue and Customs Accounts 2010–11

Please find attached the consolidated responses we promised to provide you at the hearing on 7 November 2011.

I would also like to take the opportunity to clarify what “tax under consideration” is, since figures have been quoted at the hearing, and in the media, as referring to some £25 billion of tax “outstanding” or “at stake”, when neither are actually correct.

Tax under consideration is initially an estimate of a maximum potential additional tax liability before a full investigation of the specific facts has taken place, and analysis of relevant law, and before applying any reliefs or allowances. It is not actual tax either owed or unpaid. In many cases, when HMRC has looked at the full facts it becomes clear that there is no further liability at all. Our experience is that when we look across all relevant issues under enquiry, only around half of the estimate of tax under consideration is tax actually chargeable.

The £25 billion figure quoted is not an annual figure. It is a snapshot as at a particular date, including enquiries which may have been open for several years.

We use tax under consideration as a tool to help us to direct resources where we think there is the most potential tax at risk, so that we do not focus our efforts on unproductive small issues. This approach has proved highly successful, as evidenced by the progressive rise in the Large Business Service’s compliance yield since 2005–06.

I hope this explanation is helpful, and If you require any further information please do not hesitate to contact me.

23 November 2011

Q383—Margaret Hodge

Can you also tell me whether it is true that in April 2010 there was a judgement in the British Virgin Islands in which the judge dismissed a claim that the employer of the bankers—Goldman Sachs—was in the Virgin Islands?

It is assumed that this question relates to the preliminary hearing in the First-tier Tribunal in December 2009 before Judge Williams which was held to determine whether Goldman Sachs International (GSI) was the “host employer” of the relevant employees, or whether this was Goldman Sachs Services Limited (GSSL), a company registered in the British Virgin Islands. The “host employer” would be liable to pay any NICs that might be payable. In April 2010 Judge Williams found that GSI was the host employer of the relevant employees and not GSSL, the British Virgin Islands company. This supported the HMRC position. Goldman Sachs appealed this preliminary decision to the Upper Tribunal and the hearing was due to take place in May 2011. When the settlement between HMRC and Goldman Sachs was reached, a consent order was signed and submitted to the County Court and the tax tribunal proceedings were withdrawn by agreement of the parties.

Q392—Margaret Hodge

Could you help the Committee by telling us what the claim was and what the settlement sum was (in the Goldman Sachs case)

The amount claimed in the County Court claim form was £30,816,382. We cannot comment on the settlement sum.

Q435–439—Ian Swales/Margaret Hodge

How many large settlements have there been of over £100 million, between £50 million and £100 million and between £10 million and £50 million?





More than £100m




More than £50m to £100m




£10m to £50m




These figures include “Fleming” cases. These are claims for under-declared or overpaid VAT, potentially going back as far as the inception of VAT in 1973. They followed the House of Lords judgements in January 2008 in the cases of Fleming and Conde Nast which concerned the way that the three year time limit on making claims had been introduced.In Revenue and Customs Brief 07–08, published on 20 February 2008, claims were invited in respect of overpaid output tax for accounting periods ending before 1 May 1997.Subsequent legislation in the 2008 Finance Act limited the scope for making claims for these accounting periods by introducing a new transitional period ending 1 April 2009, before which any such claims had to be made.

For historical reasons, there are differences in the management information recorded between the Large Business Service (LBS) and Local Compliance (LC). Although these tables represent numbers of settlements, the LBS figures refer to the settlement of individual issues and the LC figures to the settlement of cases.

Prepared 19th December 2011