Bottom of Class

In August I asked:

"If offshore tax havens are so evil, in the eyes of the Treasury and HMRC, why are HMRC's buildings subject to a sale and leaseback deal with Mapeley PLC (a property company based offshore in Guernsey)?"

It would seem that was not the only question that I should have asked about HMRC's relationship with Mapeley.

In fact "Serious Cat", in the comments section of that article, was quick to point out at the time that there were other issues wrt HMRC choosing Mapeley:

"I think we all know exactly why Mapeley were chosen for this property management contract and, indeed, there are some parliamentary minutes floating around which detail this reason - they're cheap!

Of course, Mapeley had no experience in property management, but theirs was the cheaper bid by far."

And

"The following is an excerpt from the "Oral evidence taken before the Committee of Public Accounts on Wednesday 27 October 2004"

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. 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.

The full text is available here and it makes very interesting reading.

Hopkins has jumped ship from Mapeley and gone to one of their rivals, while Varney pocketed a knighthood and left HMRC in 2006.

Basically, the whole thing was a massive cock-up from beginning to end. Mapeley have no property management experience and it shows. Tales of 3-month delays in receiving a replacement light-bulb are not uncommon and many members of staff have simply given up reporting issues because of the poor service.

That's the reality of the Mapeley contract."

However, it doesn't end there. The National Audit Office (NAO) have issued a report that gives HMRC a well deserved kicking for this contract.

HMRC had promised £1.2BN of savings in maintenance and other costs, as a result of signing with Mapeley. In reality the savings will be around £900M, possibly falling to £650M.

The NAO go on to state that there is now a "significant risk" that the contract will not deliver value for money over the rest of its life.

It seems that, according to the NAO, HMRC had no long-term plan regarding the sale and didn't even know that Mapeley was offshore!

The NAO is of the view that HMRC had not recognised the contract as a major strategic asset, and had not allocated the requisite commercial skills to managing it.

Well done!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"