The government has issued detailed guidelines on the new procurement policy on government contracts, designed to promote tax compliance among public sector suppliers, reports chartered accountant Harris & Co.
The new policy which will require suppliers bidding for government contracts to self-certify their tax compliance was announced in March 2013 and will apply to central government contracts over £5m that are advertised on or after 1 April 2013.
The policy note states that central government departments must, with effect from 1 April 2013, include "relevant questions" to suppliers in their procurement documentation at selection stage (ie, in the pre-qualification questionnaire (PQQ) or invitation to tender (in the case of the open procedure only) for all procurements which have or are likely to have a value of £5m or over.
The new rules mean that government departments have to ask suppliers to state whether, from 1 April 2013 onwards, any of the following issues apply:
- its tax affairs have given rise to a criminal conviction for tax related offences which is unspent, or to a penalty for civil fraud or evasion; and/or
- any of its tax returns submitted on or after 1 October 2012 has been found to be incorrect as a result of:
- HMRC successfully challenging it under the General Anti-Abuse Rule (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).
If answering "yes" to either of the questions above, the policy note states that suppliers should provide further details about the "non-compliance", including details of any mitigating factors, such as the corrective action undertaken by the supplier to date or any planned corrective action.
The policy applies to occasions of non-compliance occurring on or after 1 April 2013. As these may arise from tax returns submitted several years previously, it has been limited to tax returns submitted on or after 1 October 2012. These requirements will continue to refer back to 1 April 2013 until 31 March 2019 when a maximum six-year retrospection will apply.
The policy will apply to all HMRC administered taxes and foreign equivalents. However, suppliers will not be required to certify on behalf of any subcontractor or any other members of the supply chain.
Further guidance on the assessment of suppliers’ responses to the questions will be issued in April 2013, and HMRC will provide a point of contact to offer support for central government departments on any tax issues arising.
The detailed guidelines are available HERE