Only the Squeaky Clean

Government suppliers must be whiter than white

In September 2012 both the Cabinet Office and HMRC were tasked with devising a means to use the government procurement process to encourage tax compliance from government suppliers and crack down on abuse. This resulted in a two week consultation in February 2013, with the responses being published a month later.

The consultation was based on a proposal that, for central government contracts valued at over £5 million, on or after 1st April 2013, would be suppliers to the Government would have to self certify that they had fully complied with their tax obligations. Criteria were set out which would indicate that a candidate had failed such an obligation and would therefore be eliminated from the tendering process. The criteria included an incorrect tax return by virtue of:

• the General Anti-Abuse Rule (GAAR);
• any Targeted Anti-Avoidance Rule (TAAR);
• being involved in a failed tax avoidance scheme;
• indirect tax abuse.

Any occurrence of non-compliance during a period of the past 10 years would need to be declared together with details of any mitigating circumstances. The Contracting Authority would then evaluate the information and decide whether to exclude that supplier from the procurement process.

Following the responses to the consultation HMRC and the Cabinet Office committed to undertaking a review of the Tax and Procurement policy to establish if it is having the intended effect of encouraging compliance from government suppliers. That review has now been completed with the following findings:

• Of the 65 bids applying for central government contracts of £5 million or more, one potential bidder failed the overriding mandatory procurement test. 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 review found that early indications are that those wishing to bid for relevant contracts are very mindful of the need to be tax compliant.

For those businesses that want to get their hands on a juicy government contract, the message is clear – comply or die.