New anti-abuse tax rules to become integral part of public procurement process


In a bid to address aggressive tax avoidance, the UK Government is set to introduce new anti-abuse rules that will apply to all Government above-threshold procurements advertised from 1 April 2013. The rules will require any bidding company or individual to notify the contracting Government department of their tax compliance history from the selection stage of the procurement process. Supplier's will then in effect be obliged to self-certify that they have not been involved in an 'occasion of non-compliance' as part of the procurement process.

Suppliers will be deemed to have had an occasion of non-compliance if:

any tax return is found to be incorrect as a result of HMRC successfully challenging it;
any tax return is found to be incorrect because a scheme which the supplier was involved in, and which was, or should have been, notified under the Disclosure of Tax Avoidance Scheme rules, has proved to have failed; or
the supplier has previously been convicted of tax related offences.

If a supplier is found to have had an occasion of non-compliance, the contracting department will have the power to prevent Government contracts being awarded to that supplier. These new restrictions therefore aim to promote tax compliance by automatically excluding any supplier found to be falling short of these standards.

The Minister for the Cabinet Office, Francis Maude, recently stated that:

"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."

In addition to providing their tax compliance history as part of the procurement process, suppliers will be obliged to notify the contracting department if their status changes following the award of a contract. If a supplier's status does change, as a result of an occasion of non-compliance, proposed termination clauses will enable Government departments to terminate any already agreed contracts in place.

There will be a time limit beyond which earlier occasions of non-compliance will be disregarded. The time limit will apply from the date that the occasion of non-compliance is recognised by HMRC or a court decision, rather than the date of the occasion. The time limit has not yet been confirmed, but the current proposal is set to be 10 years.


Difficulties are foreseen in relation to discovering the true extent of compliance as the rules request suppliers to certify their compliance by a simple question and the answer given will then be relied upon by the contracting department as part of the overall selection stage. Whilst this process may seem vulnerable to abuse, any supplier found to be abusing the process would be liable for breach of contract.

The Scottish Government has not yet confirmed if this will extend to Scotland as procurement policy is a devolved matter. Though there is an argument that what the UK Government is proposing is simply an extension of existing rules.