Public Procurement and Tax Compliance
The Government uses the public procurement process to promote tax compliance. When bidding for central Government contracts over £5m, operators have to certify at the pre-qualification stage (PQQ) or ITT stage in the case of the Open Procedure, whether or not they have been guilty of tax non-compliance since 1 April 2013. In addition, the awarded contract will require the operator to notify the contracting authority of any changes regarding tax compliance and will provide remedies, including the right for the authority to terminate, in the event of tax non-compliance.
If an operator certifies non-compliance, this will not automatically exclude them from the award, provided they have taken steps to prevent future non-compliance and provided that exclusion is not required by the Public Contracts Regulations (see particularly Regulation 23).
- a tax return found to be incorrect as a result of action taken by the Revenue under the General Anti-Abuse Rule introduced in 2013 or, in relation to VAT, under the “Halifax abuse” principle established by the European Court of Justice;
- a tax return which is incorrect because a scheme the operator used has been proven to fail and was or should have been notified to the Revenue under the Disclosure of Tax Avoidance Scheme (DOTAS) Rules;
- an unspent criminal conviction for tax offences or a penalty for civil fraud or tax evasion; or
- demonstrated by 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.
Suppliers do not have to certify on behalf of group companies or sub-contractors but if the operator is a joint venture or consortium the certification will be for all its members. If it is a partnership, the certificate covers the partnership but not its members.
The Government in August published the results of a review of 65 bids for central Government contracts over £5m and none failed on the basis of certification of non-tax compliance. It is surely unlikely that any company would risk a reckless or fraudulent self-certification so the Government concludes that bidders are very mindful of the need to be tax compliant.
Of course it is early days. In five years’ time, bidders will have to review the previous six years for tax non-compliance. But be in no doubt how seriously the Government takes the issue.