- Service: Tax, Budget 2013
- Type: Press release
- Date: 20/03/2013
Following consultation launched in February, the Government has confirmed its intention to introduce rules as of 1 April this year which will require companies bidding for Government contracts to certify whether or not they have been involved in failed tax avoidance schemes. Today’s budget includes some significant changes to the original proposals.
Commenting on the amended proposals announced today, Chris Morgan, head of tax policy at KPMG said: “The changes announced today show the benefit of an open and constructive dialogue between HMRC and business. The stated intention of the new rules is to change future behaviour, to ensure companies bidding for Government contracts do not engage in tax avoidance, contrary to thre intention of Parliament. But as drafted they were so wide and unclear in scope that either it would have been impossible to apply them or they would have resulted in lengthy legal disputes. Either way this would have been bad for business and the Government. The changes bring much greater clarity and mean suppliers should be able to get on with their business of proposing for contracts while the Government can ensure companies do play by the tax rules.”
The changes to the original proposals are significant. In particular:
- Most importantly they will only apply to events of default after 1 April 2013. The original proposal required companies to go back 10 years to identify such events.
- The definition of event of default is clarified. This occurs when a company has to amend its tax return due to the application of the new general anti-avoidance principle (GAAR), the Halifax Abuse principle (relevant for VAT), entering into a scheme that has or should have been notified to HMRC under existing anti-avoidance rules (the Disclosure of Tax Avoidance Scheme or DOTAS rules) or a conviction for tax evasion.
- It is the “economic operator” as defined by procurement rules that has to make the certification and it is not necessary to consider related companies.
- Foreign suppliers will only have to certify compliance with overseas rules only where equivalent rules exist.
- The threshold will be contracts worth £5m.