Public Services

Government plans squeeze on major contracts for tax avoiders

Charlotte Jee Published 14 February 2013

Departments could terminate contracts if supplier breaches new tax compliance rules


The government has drafted new rules, due to come into effect in six weeks on 1 April 2013, that would permit Whitehall departments to ban companies and individuals involved in failed tax avoidance schemes from being awarded government contracts.

According to a Written Ministerial Statement submitted by HM Treasury, the rules, which are being made available for consultation and comment today, would also permit departments to include a clause in contracts that permits them to terminate an agreement if a supplier subsequently breaches the new tax compliance obligations.

The supplier would be contractually obliged to tell the contracting department if their status changes after the award of the contract.

The rules would also allow departments to ask potential contractors, including IT companies, whether they have fulfilled all their tax obligations, and oblige potential suppliers to notify contracting departments if any tax return has recently been found to be incorrect as a result of HM Revenue & Customs (HMRC) successfully challenging it or because of a failed avoidance scheme which the supplier was involved in.

Danny Alexander, Chief Secretary to the Treasury, said, "The government is clear that aggressive tax avoidance is totally unacceptable. That's why we are closing loopholes, bringing in a new General Anti-Abuse rule, and investing hundreds of millions of pounds in additional funding to help HMRC clamp down. These new rules are another significant tool as they will enable Government departments to say no to firms bidding for Government contracts where they have been involved in failed tax avoidance."

Cabinet Office minister Francis Maude said, "This Government is dealing with the unprecedented deficit we inherited, and that's why it is only right we ensure that only companies which are meeting their tax obligations can win government contracts. We will continue to put value for money at the heart of our procurement practice as we drive millions of pounds of savings for the taxpayer. These new rules provide a framework that allows departments to promote tax compliance through the bidding process."

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