Resellers bidding for central government contracts of £2m or more from 1 April 2013 will be asked to self-certify their tax compliance during the selection stage, according to a draft proposal from HMRC.
HMRC said in the draft statement, currently in consultation, that this would be "via a simple question", added into an overall selection assessment by the contracting authority which the supplier would have to pass.
"Standard remedies will be available to departments within contracts, enabling up to and including termination of contract in circumstances where suppliers either fail to disclose an occasion of non-compliance at the outset, or where such an occasion occurs during the lifetime of the contract," it said.
A full document is available as a PDF on the Cabinet Office website at http://www.cabinetoffice.gov.uk/resource-library/type/1384.
All HMRC taxation, including corporation tax, environmental duties, VAT and stamp duty would be under the spotlight, HMRC said, while individuals, sub-contractors, and non-UK suppliers or multinational firms would also have to comply.
A 19 February procurement note from the Cabinet Office said the new rule is meant to deter both tax avoidance and tax evasion by suppliers to government. Suppliers can be seen as non-compliant under "any targeted anti-avoidance rule (TAAR)", the note said.
Resellers will also be deemed non-compliant if a tax return is amended, or if any tax return is "found to be incorrect" because a scheme in which the supplier was involved, which was or should have been notified under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, has failed.
Tax avoidance refers to the strategy of using any number of legal methods to pay less tax, while tax evasion refers to failure to comply with the law.
The Cabinet Office has asked for comments on the proposal to be sent to [email protected] no later than 22 February.
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