There will be red faces at HMRC today as a report from the National Audit Office has identified an offshore firm in the taxman’s midst. Mapeley, who were contracted  to run tax offices by HMRC around eight years ago, operate an offshore operation designed to help them avoid millions of pounds in tax – exactly the same setup that resulted in a slap on the wrist for Google, Amazon and Starbucks from the Public Accounts Committee.

The original deal, struck back in the halcyon days of 2004, was worth a whopping £3.3 billion (this has now risen to £3.9 billion) and was designed to save the taxman £1.2 billion in operational costs (now down to £900 million). Lasting twenty years, the contract handed control of almost 600 tax offices over to Mapeley. Had the firm been operating a standard company structure they would have been in line for a tax bill of around £184 million, but due to their offshore status they will contribute just £14 million to the UK’s tax coffers.

Although the revelation would never exactly be beneficial for HMRC, the unearthing of this offshore contract now will prove particularly embarrassing given the public and media interest around offshore tax avoidance at the moment. Although the Public Accounts Committee has been dealing with larger corporates accused of behaving badly, HMRC has been gifted an extra £77 million to tackle avoidance, including a closer look at the affairs of several umbrella companies. Could it be they will be forced to launch an investigation into one of their own suppliers?

A spokesperson for HMRC has already admitted the discovery is ”highly damaging to the department’s reputation.”

Photo by Ryan Kozie