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UK firms face ban from bidding public sector contracts

New rules from Whitehall.

Major companies in the UK will be banned from bidding public sector contracts if they are found in avoiding or minimising taxes.

Danny Alexander, chief secretary of HM Treasury, will announce today that companies will have to sign a declaration accepting that they have followed tax rules in the past 10 years before bidding for government deals that were worth more than £2m.

In its study, the Financial Times revealed that major IT companies in the UK tried to keep their corporation tax bills low.

Apart from IT firms, water companies, infrastructure suppliers and global brands like Starbucks, Amazon and Google have also been criticised over their tax affairs.

The new rules, effective April 2013, would include flouting specific bans on certain tax-avoidance schemes or setting up complex payment structures to avoid value added tax. In addition, any breach of the new general anti-avoidance rule, also effective April, will be aimed at ending highly artificial tax avoidance schemes.

Alexander said: “It is clear there has been an approach to tax which I don’t consider to be acceptable, and I think most importantly, the British public don’t consider to be acceptable. If you work for the government, whether you’re an individual employee or a company that has got a contract with the government, you need to be behaving properly with regard to tax rules.”

The Treasury chief secretary said: “Every company should be able to put their tax affairs in good order, so they don’t fall foul of these rules ... I don’t think it’s an onerous burden.”

Alexander has been working on the issue with the Cabinet Office minister Francis Maude, since the summer.