From 1 April 2013 bidders for government contracts will need to certify that they are tax compliant and if they fail this test they will be excluded from winning government contracts.

The new restrictions will apply to Central government tenders advertised on or after 1 April 2013. The bidding process will include a new pass/fail question in the pre-qualification questionnaire (PQQs). This will require bidders to self-certify that they had no occasions of non-compliance in the past. PQQs should be submitted within 30 days of the initial advert in the Official Journal of the European Union. Tax non-compliance will arise where the bidder has accepted, or a court has determined, that additional tax is due and as a consequence a tax return has been amended. Tax non-compliance will further depend on circumstances where one or more of the following criteria applies:

• The new general anti-abuse rule applies.
• The Halifax abuse principle applies – this is an abusive practice when two conditions are met. The first that the transactions concerned must give a tax advantage contrary to the purpose of the legislation, and secondly, that the “essential aim” of the transactions was to obtain a tax advantage.
• The scheme was notifiable under the disclosure of tax avoidance scheme rules and has failed, or
• There is a current criminal conviction for a tax related offence or a penalty for civil fraud or evasion.

Bidders will have an opportunity to add an explanatory statement setting out mitigating factors when they submit their PQQs. The new guidance applies to contracts advertised by: central government departments, executive agencies and non-departmental public bodies.

Multi-national companies continue to draw the attention of the UK press over allegations that they contrive to export profits made in the UK to lower tax jurisdictions. In this way economic activity in the UK escapes UK tax. This in contrast to numerous small and medium sized businesses who are reported to be paying their fair share of income tax and corporation tax.

Google have responded by pointing out that their tax planning strategies are allowed in law and that if the UK tax authorities are at odds with Google’s tax contribution they should change the law.

The UK is one of the most productive markets for both Google and Amazon and in both cases UK sales grew by more than 20% last year, British customers generating about 10% of global sales.  

In Google’s case evidence has emerged that UK staff are negotiating and closing deals – Google has always insisted, and continues to insist, that sales are negotiated in the UK and closed in Ireland. This issue is just one of the aspects that justifies their tax strategy. Pressure on these multi-national groups is likely to increase. Politicians will struggle to defend their austerity programme to UK voters if large businesses are being accused of not making a fair contribution to UK taxes.

 George Osborne is making this off-shore shift of profits a priority for Britain’s chair of the G8. 

 In accordance with legislation HMRC may publish information about a deliberate tax defaulter where:

• HMRC have carried out an investigation and the person has been charged one or more penalties for deliberate defaults, and
• those penalties involve tax of more than £25,000.

However, their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults. HMRC will publish sufficient information to identify the deliberate tax defaulter, the penalties imposed for their deliberate defaults and the amount of tax on which those penalties are based. This sufficient information includes the name of the taxpayer and their postal address.

The first list was posted on HMRC’s website on 21 February 2013. A further list was added on 14 May 2013.

 In the light of recent press interest in multinationals who, apparently, are legally avoiding the payment

In a radical rethink of the way in which London is funded the 17 members of the London Commission are due to report this week and are likely to recommend that certain tax raising powers are devolved. It is estimated that Revenue streams of up to £12bn could be placed under local control with a pound-for-pound reduction in Treasury grants.

Taxes mooted as possible candidates for the transfer include:

• Stamp Duty Land Tax, and
• Capital Gains Tax on property disposals

These would be in addition to Business Rates and Council Tax. In addition to these taxes the London Commission report seems likely to recommend a London tourist tax. This would be used to invest in London’s tourist industry. 

How these taxes would be collected is another matter. At present Capital Gains Tax in particular is assessed by HMRC from information filed via self assessment returns. Are we to expect a national and a London rate for CGT? Will London be issuing tax returns? It would seem there are a lot of practical issues to be sorted in addition to the Treasury’s attitude to devolving tax revenue streams to London.

It is also mooted that the present Treasury controls over local borrowings by the GLA (Greater London Authority) be removed in order that London can raise money to fund the promotion of growth or to reduce public expenditure.

No doubt Bristol, Birmingham, Liverpool and Manchester, and a number of the other, larger cities will be watching developments with interest. We may be moving toward a nation of city states?