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Public sector contract bidders ‘almost all fully compliant’

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Companies bidding on public sector contracts are ‘very mindful’ of the need to be tax compliant as a prerequisite for appointment one year after new rules on tax and procurement came into force, the government has stated. Since the new rules came into force in April 2013, only one of the 65 potential bidders for central government contracts worth £5m or more failed the ‘overriding mandatory procurement test’, the Cabinet Office said, following a mandatory review of the policy. However, it revealed that this failure was due to the bidder ‘being unable to provide and deliver services that would fulfil the procurement department’s contract, rather than an issue of whether or not they were tax compliant’.

Ian Hyde (Pinsent Masons) said the data showed that ‘the popular belief that big businesses are all engaged in systematic abuse of the tax system is actually wide of the mark’.

‘Since the recession hit, media scrutiny of “unfair” corporate tax arrangements has been intense, and any public outcry can be hugely damaging to a business’s reputation,’ he said. ‘Companies have been quick to respond to public sentiment and political pressure, acknowledging that the potential loss of business which can result from an adverse story in the press about a company’s tax arrangements is not worth the risk.’

Andrew Hubbard (Baker Tilly) also considered whether this could be an indication of the wider sea-change in the approach taken by companies to their tax profile: ‘Perhaps it is self-selecting, in that it would only be companies who knew that they would be able to sign a certificate who would apply in the first place. Perhaps some of the companies have [undertaken] avoidance schemes that HMRC has not yet challenged. But it is perhaps an indication of the very different attitude that companies now take to their tax profile.

Some might genuinely have had a change of heart; others may still feel that there is nothing intrinsically wrong with complex tax planning, but that HMRC’s very strong anti-avoidance rhetoric has meant that they have to take a pragmatic view. Either way, there is no doubt that the landscape has changed dramatically in recent years. The adverse publicity from being seen to avoid tax has become a major driver in forming a company’s tax policy.’

Issue: 1229
Categories: News , Corporate taxes