Government suppliers self-certify tax compliance
Early indications are that businesses wishing to bid for government contracts are “very mindful” of the need to be tax compliant, according to a review of the government’s new tax and procurement policy.
Government departments have the discretion to exclude from the procurement process a business that cannot certify a “clean” record. Danny Alexander, chief secretary to the Treasury, told the Liberal Democrat conference two years ago that there was nothing to prevent “the very small minority of firms that don't play by the rules” from winning government contracts. Taxpayers’ money “should not be funding tax dodgers”, Alexander added.
The new policy, which applies to central government contracts over £5m, took effect in April 2013 following an “informal” consultation.
In a joint statement yesterday HMRC and the Cabinet Office said the review explored whether the policy is having the intended effect of encouraging tax compliance from government suppliers.
“Of the 65 bids applying for central government contracts of £5m or more, one potential bidder failed the overriding mandatory procurement test,” they said. “This failure, however, was due to the bidder being unable to provide and deliver services that would fulfil the procurement department’s contract, rather than an issue of whether or not they were tax compliant. The remaining 64 potential bidders declared that they had been tax compliant.”
The policy was outlined in a Cabinet Office note in July 2013. It operates “entirely on the basis of self-certification by suppliers”. A supplier must state whether:
- its tax affairs have given rise to a criminal conviction for tax related offences which is unspent, or to a penalty for civil fraud or evasion; and/or
- any of its tax returns submitted since October 2012 has been found to be incorrect as a result of (a) a successful challenge under the general anti-abuse rule (GAAR) or the “Halifax” abuse principle; or (b) a tax authority in a jurisdiction in which the supplier is established successfully challenging it under any tax rules or legislation in any jurisdiction that have an effect equivalent or similar to the GAAR or the “Halifax” abuse principle; or (c) failure of an avoidance scheme which the supplier was involved in and which was, or should have been, notified under the disclosure of tax avoidance scheme (DOTAS) regime or a similar regime in another jurisdiction.
A tax return becomes incorrect “if, by agreement or litigation, additional liabilities are due because evasion is proven or avoidance fails”.