Lawyers have served legal papers on HM Revenue and Customs (HMRC) after issuing proceedings in the High Court over an alleged "sweetheart" tax deal.

Campaigners UK Uncut Legal Action are seeking a declaration that the agreement by which banking giant Goldman Sachs was allowed to skip a multimillion-pound interest bill on unpaid tax on bonuses was unlawful. They also want £20 million allegedly involved to be returned to the public purse.

The deal was highlighted earlier this week when tax chiefs were criticised by MPs for allegedly bending rules to do favours for big firms at a cost of millions to the taxpayer.

The Public Accounts Committee warned that millions more were at risk unless procedures were tightened. Its report called for safeguards to be put in place to avoid the impression that HMRC enjoyed an "unduly cosy" relationship with major companies.

Goldman Sachs was allowed to skip the interest bill after the country's top tax official Dave Hartnett was wrongly advised there was a "legal impediment" to collecting it.

The potential cost to the taxpayer is officially put at £8 million but the committee was given evidence from a whistleblower that the sum could be as high as £20 million.

UK Uncut Legal Action said earlier this week it had made the decision to go forward with its case after receiving what it termed a "dismissive" response from HMRC to letters from its lawyers demanding the alleged deal should be quashed.

It said its legal action was the only mechanism that could result in a declaration that the deal was unlawful, as well as returning up to £20 million to the public purse.

Lawyers Leigh Day & Co confirmed in a letter sent in October that if the settlement was not reversed it would issue the proceedings, which seek specific disclosure for all internal documents regarding the process by which agreement was reached.

HMRC has denied that the loss to the taxpayer in the Goldman Sachs case could be as high as £20 million.