Summary
HMRC scored something of an embarrassing own goal, when it signed up with Mapeley.
Analysis
If offshore tax havens are so wrong, in the eyes of the UK Treasury and Her Majesty's Customs and Revenue (HMRC), why are HMRC's buildings and estates subject to a sale and leaseback deal with Mapeley PLC (a property company based offshore in Guernsey)?
HMRC scored something of an embarrassing own goal, when it signed up with Mapeley, as the following extract from the "Oral evidence taken before the Committee of Public Accounts on Wednesday 27 October 2004" demonstrates:
"Q1 Chairman: Good afternoon. Welcome to the Committee of Public Accounts where today we are looking at PFI: the STEPS deal, and we are joined by witnesses from the Inland Revenue, HM Customs and Excise and a witness from Mapeley.
"Q1 Chairman: Good afternoon. Welcome to the Committee of Public Accounts where today we are looking at PFI: the STEPS deal, and we are joined by witnesses from the Inland Revenue, HM Customs and Excise and a witness from Mapeley.
Mr Varney is the executive chairman of the Inland Revenue/Customs and Excise. It is your first visit, I believe. You are very welcome. He is joined by Ms Helen Ghosh, director general, corporate services, and Ms Siobhán McHale, director of estates and, from Mapeley, Mr Jamie Hopkins who is the chief executive officer.
Mr Varney, does it give the Inland Revenue any sense of shame that they are now known as a well known tax avoider?
Mr Varney: I do not think they are known as a well known tax avoider. I do recognise that in the agreement there is an unfortunate feature. As you know, the government changed the guidelines so for a forward procurement that would not arise.
Q2 Chairman: Why did you not specify in the bidding documents for this deal that these properties should be held onshore?
Mr Varney: With the benefit of hindsight, one can say it was a mistake.
Q3 Chairman: Will you please look at paragraph 2.24 which you will find on page 21? You will see there that it says: "The Board of the Inland Revenue only became aware of the tax arrangements late in the procurement" and the Customs and Excise were not told until after the deal had been signed. Why is that?
Ms Ghosh: I was not there. It was before my time, but—.
Q4 Chairman: We are not interested in whether you were there or not. You represent this Department and you will answer questions on it.
Later in the minutes...
Q92 Mr Steinberg: You have no proven record, have you, as a company in property management?
Mr Hopkins: Prior to this transaction, no.
Q93 Mr Steinberg: Why did you go to them? Purely financially?
Mr Varney: £500 million to reinforce—
Q94 Mr Steinberg: You were prepared to gamble the whole of the Inland Revenue estate on the basis of £500 million which they may at the end of the day cock up?
Mr Varney: The NAO Report makes very clear we followed all the lessons from DWP. We tried to look at how we minimised the risk in this contract. The public purse is better off to the extent of £500 million, plus it has competition and flexibility. That is not a gamble. That is a sensible decision.
Q95 Mr Steinberg: I would have been very suspicious when a company comes along and they can undercut everybody by half a billion pounds.
Mr Varney: I do not think they are known as a well known tax avoider. I do recognise that in the agreement there is an unfortunate feature. As you know, the government changed the guidelines so for a forward procurement that would not arise.
Q2 Chairman: Why did you not specify in the bidding documents for this deal that these properties should be held onshore?
Mr Varney: With the benefit of hindsight, one can say it was a mistake.
Q3 Chairman: Will you please look at paragraph 2.24 which you will find on page 21? You will see there that it says: "The Board of the Inland Revenue only became aware of the tax arrangements late in the procurement" and the Customs and Excise were not told until after the deal had been signed. Why is that?
Ms Ghosh: I was not there. It was before my time, but—.
Q4 Chairman: We are not interested in whether you were there or not. You represent this Department and you will answer questions on it.
Later in the minutes...
Q92 Mr Steinberg: You have no proven record, have you, as a company in property management?
Mr Hopkins: Prior to this transaction, no.
Q93 Mr Steinberg: Why did you go to them? Purely financially?
Mr Varney: £500 million to reinforce—
Q94 Mr Steinberg: You were prepared to gamble the whole of the Inland Revenue estate on the basis of £500 million which they may at the end of the day cock up?
Mr Varney: The NAO Report makes very clear we followed all the lessons from DWP. We tried to look at how we minimised the risk in this contract. The public purse is better off to the extent of £500 million, plus it has competition and flexibility. That is not a gamble. That is a sensible decision.
Q95 Mr Steinberg: I would have been very suspicious when a company comes along and they can undercut everybody by half a billion pounds.
Are you not suspicious at all about that?
They do not have a record in property management and they can come along and undercut everybody by half a billion pounds and you think you are on a safe deal, do you?
Mr Varney: I think you do the due diligence which is described in the NAO Report but I do not see my job as trying to maximise the revenue of service providers..."
Mr Varney: I think you do the due diligence which is described in the NAO Report but I do not see my job as trying to maximise the revenue of service providers..."
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