Accusations that HMRC cheated the taxpayer out of £20m in negotiating a tax settlement with Goldman Sachs have been rejected in the High Court.

The so-called 'sweetheart deal' was legally challenged by the grass-roots campaign group UK Uncut but was dismissed by Mr Justice Nicol presiding over the case.

In delivering his verdict Nicol said that while the deal was 'not a glorious episode in the history of the Revenue', it was nonetheless not unlawful.

In earlier hearings, former HMRC permanent secretary Dave Hartnett - who left the department, over the furore caused by the revelation of the tax deal - admitted to pushing for the settlement with the global investment bank in an effort to save embarrassment for himself, HMRC and the government.

Speaking after the court's judgment Jim Harra, HMRC's director general for business tax, said: 'The High Court's comprehensive dismissal of UK Uncut's claim puts to rest the fallacy that HMRC is soft on large businesses. HMRC has an exemplary record in relentlessly challenging those who avoid tax. We have recovered £34bn in additional revenues from large businesses in the last seven years.

'It confirms what HMRC has always said: that while we made errors in settling the Goldman Sachs dispute, we made the right settlement in the circumstances, and that our decision was both proper and lawful. This issue has been rigorously and repeatedly scrutinised - by the Public Accounts Committee, by a retired High Court judge on behalf of the National Audit Office and now by the High Court itself.

'The public can have confidence in our governance processes, which we have strengthened, providing greater levels of scrutiny, transparency and role separation. The High Court has now drawn a line under the Goldman Sachs issue. HMRC can now get on with the critical job of working to ensure that all individuals and companies, big and small, pay the tax they owe to fund the UK's essential public services.'

Anna Walker of UK Uncut Legal Action, spoke of her disappointment at the outcome of the case, but said: 'It has exposed the truth behind these backroom deals, the government talks tough on tax, but does not do much.'