In lieu of the Public Accounts Committee’s intention to scrutinise the tax affairs of government IT suppliers, tough new rules have been unveiled permitting departments to block tax avoiders from bidding for public sector contracts. The rules will also enable departments to cancel existing contracts if the supplier attempts to avoid tax after signing up for work.
Danny Alexander, the chief secretary to the Treasury, and Francis Maude, the cabinet minister, revealed the new measures, which will come into effect from 1st April following government consultation on the draft guidance. The initiative follows a Financial Times investigation that suggested that some major government IT suppliers, including Dell, Symantec, Xerox, CSC and Oracle, had paid little to no corporation tax.
Prospective suppliers will now be obliged to notify contracting departments of their tax compliance history. They will also be required to notify departments of any inaccuracies in recent tax returns, either because they were successfully challenged by HMRC – under the General Anti-Avoidance Rule, for example – or because they took part in a failed avoidance scheme. The latter should be notified under the Disclosure of Tax Avoidance Schemes rules.
The new rules additionally require potential suppliers to disclose previous tax offence convictions and whether they have previously been penalised for evasion or civil fraud. Any bidder meeting these criteria can be summarily disqualified from the procurement process.
Mr Alexander said: “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.”
Many PAYE Umbrella Company Employees are likely to give a thumbs up to the initiative.