HM Revenue and Customs caught in their own privatisation tax trap!

HM Revenue & Customs

In 2001 HMRC signed a £3.3bn contract with Mapeley, a little-known private equity firm. The deal involved handing over the ownership and management of 591 tax offices, including the freehold of 132 of them, to an offshore company managed by Mapeley, then based in the Cayman Islands.

Mapeley won the contract largely because it underbid UK rivals, which had to include VAT in their calculations. The Cayman Island connection gave Mapeley a 20% advantage.

The irony of the tax authority signing a deal with an avoidance vehicle was lost on the government and the then chancellor Gordon Brown. It banked the £370m from Mapeley and pressed ahead.

Civil servants were unaware at the time that 15 years later they would be managing around 20 change programmes, several of which involve reorganising the Mapeley offices. The NAO has repeatedly criticised the deal as expensive and said it should be ditched when it runs out in 2021, despite Mapeley, which is now a major commercial landlord across Britain, shifting back to the UK.

HMRC says legal advice at the time blocked it from excluding firms based in tax havens and that this is no longer the case. From 2021 it plans to move to “direct leases for property and smaller, more flexible facilities management contracts that we can control more easily”.”