Cabinet Office clarifies role of procurement in tax compliance

The Cabinet Office has moved to clarify rules on the use of the public procurement process to promote tax compliance.

The Government’s policy was introduced in the 2013 Budget and since 1 April 2013 has applied to all central government contracts worth more than £5m.

Suppliers who are bidding for these contracts must now self-certify their tax compliance.

In a new Action Note, which replaces one dated 25 July 2013 and sets out the scope and background of the policy, the Cabinet Office advises on how to take account of it in procurement documentation and provides further detailed guidance on how departments should assess suppliers’ responses and the inclusion of new clauses in contract terms.

The note provides:

  • Additional clarification of mandatory exclusion criteria; and
  • More precise clarification of the scope of an ‘occasion of non compliance’ with updated drafting for inclusion on both procurement documentation and contracts.

Departments must already include the relevant questions laid down by the Cabinet Office in their procurement documentation at the selection stage or the invitation to tender for all procurements which have or are likely to have a value of £5m or over.

However, they must now additionally ask whether a supplier’s tax returns submitted on or after 1 October 2012:

  • have given rise to a criminal conviction for tax related offences which is unspent, or to a civil penalty for fraud or evasion; and/or
  • has been found to be incorrect as a result of: a successful HMRC challenge under the new General Anti-Abuse Rule or the ‘Halifax’ abuse principle; 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 the 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) or any equivalent or similar regime in any jurisdiction. (This only applies in relation to a DOTAS scheme which a supplier has used in relation to its own tax return.)

The Action Note can be viewed here.