Tax cheat ban on state deals questioned

LAWYERS yesterday raised concerns over plans to ban companies that have taken part in aggressive tax avoidance schemes from bidding for large government contracts.

Ministers said the rules, which are due to come into effect at the start of April, will force businesses who want Whitehall contracts worth more than £2m to disclose whether HMRC has successfully challenged their tax return, as well as any involvement in failed tax avoidance schemes.

However Jason Collins of law firm Pinsent Masons said the rules were too flexible: “The proposals give too much influence to bureaucrats and could result in companies risking challenging HMRC on tax avoidance disputes rather than deciding to settle. Many companies have settled with HMRC over tax avoidance disputes and have since acted in good faith, but now they could be barred from procurement contracts.”

Under the plan departments will also gain the power to terminate ongoing contracts worth more than £2m if a company is later found to be involved in tax avoidance schemes.

“These new rules will enable departments to say no to firms bidding for government contracts where they have been involved in failed tax avoidance,” said Treasury minister Danny Alexander.