A landmark ruling would make HMRC facing a judicial review over letting off millions in taxes to companies

In a landmark move the Justice Mr Simon at the High Court has granted permission to campaigners to challenge the controversial arrangements between the Goldman Sachs the investment banker and the Her Majesty’s Revenue Service (HMRC).

The deal termed as ‘sweetheart deal’ had let off the investment banker from paying £20million owed in tax bills.

Mr Justice Simon said that arguably it was a case where the HMRC had acted unlawfully. The ruling means that HMRC will have to defend its conduct as part of a judicial review, expected to begin in October.

The permission had come on the same day, when official auditors cleared the taxman over deals with five large companies, including Goldman Sachs and Vodafone.

The National Audit Office (NAO) concluded these settlements were ‘reasonable’ and fair to the public purse.

But the review by former senior tax judge Sir Andrew Park criticised officials for the way they handled the arrangements.

John Mann, a member of the Treasury select committee, declared that NAO was not fulfilling its role properly and it was a whitewash.

He said that given a chance everyone would like to negotiate their tax down. When some are not allowed to, then why companies like Goldman Sachs should be allowed? Instead of saying it was reasonable the NAO should be spelling out the exact money that the taxpayer had lost in the deal.

The case was focused on the contentious decision in 2010 to settle a dispute over National Insurance due on bonuses with Goldman Sachs. The company had taken route of its overseas trusts to pay London bankers to avoid a £23.2million bill in National Insurance.

Other companies used similar schemes but they all settled with HMRC in 2005. Only Goldman Sachs kept up its legal battle. By 2010, it finally settled but the taxman let off the bank from paying interest which would have accrued on the unpaid bill.

Though officially the cost came to £8million the tax campaigners UK Uncut, which took the legal action, cited a report by MPs which said the loss could be as high as £20million.

The campaigners say it is unfair for HMRC to allow multi-nationals to avoid tax while being harsher on families and small businesses.

Both cases raise huge questions about the conduct of Dave Hartnett, the head of HMRC, who took the lead in negotiating the deals. A senior accountant, who declined to be named, said the High Court ruling ‘means there was a suspicion that there was more to come out.