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A £35,000 deal between HM Treasury and an American law firm may not have been hugely effective, but it was probably not as outrageous as has been claimed, a leading tax expert has suggested.
John Cullinane, a partner at Deloitte and Touche's financial services tax practice, said that use of a private sector business by a Government department seems 'reasonable' in the modern, fast-paced age — although not the way forward.
Accountancy Age magazine has reported that the Treasury agreed to pay Skadden, Arps, Slate, Meagher and Flom $70,000 for a report on whether or not non-domiciled taxpayers should be allowed to claim the Government's new £30,000 annual charge against their US tax bills. Details of the report were available in this year's Budget notices.
The agreement — the minutiae of which was uncovered via a Freedom of Information request by Accountancy Age - has been criticised by the Conservatives for wasting taxpayers' money and not leading to practical results.
They suggested that the Treasury would have been wiser to confer with America's Inland Revenue Service on the subject. The party, reports Accountancy Age, also voiced its displeasure at the fact the contract for the business had not been tendered.
Mr Cullinane, a former CIOT president, conceded that Skadden's advice did not appear to have made much impact on the Government's latest tax thinking, and he also remarked that it was 'novel' for a private firm feature in Budget notices.
'Mind you, I'm not sure the need has risen before', he said, adding that the Treasury 'can't expect other countries to give it what it wants, when it wants', so use of private company would be a practical solution.
On the matter of a lack of tender, John remarked that while Government departments must usually offer out contracts, a one-off £35,000 fee from a US law firm would be unlikely to distort competition, and no rival business would have charged significantly different.
The Treasury has claimed that the lack of tender was because the work was 'urgent'.
'One has to wonder why it was urgent,' commented John. Finally, he said that in future he 'wouldn't want to see the Treasury taking private sector advice' but that in this instance it was not shocking but seemed 'perfectly reasonable'.
