30 SECOND GUIDE: Tax settlements

Updated: 04:32 EST, 16 December 2011

Changes: MPs are likely to demand that the Revenue tightens up its procedures for approving agreements over disputed tax bills

As the Public Accounts Committee prepares to issue a report next week into deals that let companies off paying large tax bills, the City and Finance team explains why these settlements are made and the concerns they raise.

Sounds all very friendly

Friendly? Some suggest they’re a bit too cosy.

Cosy? Explain.

MPs are worried that HM Revenue & Customs has become just a tad too eager to strike deals with companies when there’s a disagreement about how much tax they should pay.

Rings a bell.

It should do. The Revenue struck deals with companies such as Vodafone and Goldman Sachs, but MPs on the Public Accounts Committee believe these deals were far too soft.

They think Vodafone got away with paying maybe £2bn less than it should have done. (Some observers suggest Vodafone’s tax bill should have been £8bn higher.) Goldman was also let off too lightly, the MPs say: it ended up with a bill perhaps £20m or so less than it might have been.

Rapped knuckles?

The committee is expected to issue a report next week. And it is likely to demand that the Revenue tightens up its procedures for approving agreements over disputed tax bills.

Anyone sacked?

Sacked? Certainly not: the Revenue wouldn’t want any unpleasantness. But last week, Dave Hartnett, head of Revenue & Customs, announced that he was to retire. Naturally, the timing had absolutely nothing to do with any criticism he might face.