Tax compliance through use of the procurement process

In furtherance of its policy to promote tax compliance through use of the procurement process, introduced in the 2013 Budget, the Cabinet Office have issued a Procurement Policy Note (PPN) which replaces Action Note 06/13. The policy applies to all central government contracts over £5m and requires suppliers bidding for these contracts to self-certify their tax compliance.

The PPN sets out the scope and background of the new policy, how to take account of the policy in the procurement documentation and sets out detailed guidance on how the awarding departments should assess suppliers' responses. It also sets out what new clauses should be included in contracts.

Much of the PPN replicates the earlier Action Note. Indeed, the PPN makes few changes to the earlier Action Note, most being clarificatory. Principally, it confirms that if a supplier has declared it has an occasion of non-compliance (OONC), if that OONC also falls within the mandatory exclusion criteria under the Public Contracts Regulations 2006 or the Defence and Security Public Contracts Regulations 2011 then the awarding Authority has no discretion and must exclude the supplier.

The PPN also makes it clear that an OONC applies to tax returns submitted on or after 1 October 2012:

• that are found to be incorrect as a result of a relevant tax authority successfully challenging the supplier under a General Anti-Abuse Rule, the Halifax Principle or any foreign equivalent;
• that are found to be incorrect as a result of the failure of an avoidance scheme which should have been notified under DOTAS or a foreign equivalent; and
• that gives rise to a criminal conviction for an unspent tax related offence.

Please click on the links below for the other articles in the February 2014 tax newsletter.

• "Salaried Member" rules for LLPs
• Tax avoidance: high-risk promoters and follower penalties
• Kumon: VAT abuse
• Marks & Spencer: cross-border group relief
• Southern Cross: compromise agreements with HMRC
• VAT - changes to zero-rating in relation to student accommodation