Procurement policy note 03/14: promoting tax compliance · first published 7 February 2014
This Procurement Policy Note (PPN 03/14), in force from 1 April 2013, requires all suppliers bidding for central government contracts worth £5 million or more to self-certify that their tax returns have not given rise to a criminal conviction, a civil penalty for fraud or evasion, or a successful HMRC challenge under anti-avoidance rules. If a supplier has had an 'Occasion of Non-Compliance' (OONC) — a finding of tax non-compliance — the buying department can exclude them from the procurement, though mitigating factors may be considered. Contracts awarded under this policy must also include clauses allowing early termination if an OONC comes to light during the contract, and suppliers must notify the department of any changes to their tax compliance status. The £5 million threshold was deliberately set to avoid burdening smaller, lower-value procurements. Local government and wider public sector buyers may choose to apply the same rules, but are not required to do so.
WHO THIS APPLIES TO
THE ENKII VIEW
For most SMEs bidding below the £5 million threshold, this policy creates no additional burden. However, SMEs that do compete for larger central government contracts — or that join consortia or joint ventures bidding at that level — need to be ready to self-certify on behalf of the whole consortium or joint venture, making every member's tax history a live bid risk. The explicit carve-out that self-certification does not extend to subcontractors or supply chain members is helpful, but SMEs acting as lead bidder must ensure their own house is fully in order before submission.
1. Before submitting any bid for a £5m+ central government contract, carry out an internal tax compliance check: confirm no unspent criminal convictions for tax offences, no civil penalties for fraud or evasion, and no failed GAAR challenges or DOTAS scheme failures since 1 October 2012.
SMEs bidding for central government contracts ≥£5m (or leading a consortium doing so) — Suppliers must self-certify on all these points at the selection stage — a 'yes' answer can lead to exclusion, and mandatory exclusion grounds leave the buyer with no discretion.
2. Collect tax compliance declarations from every member of the joint venture or consortium before submitting the Pre-Qualification Questionnaire (PQQ) or Invitation to Tender — each member's record is in scope.
SMEs leading a joint venture or consortium bid for a £5m+ central government contract — The policy explicitly states that where the supplier is a joint venture or consortium, 'the self-certification must cover all members of the joint venture or consortium'.
3. If your firm has had any OONC, prepare a clear written mitigation statement covering: corrective actions taken or planned, any changes in personnel or ownership, and changes in financial, accounting or audit procedures since the OONC.
SMEs with any historic tax irregularity bidding for £5m+ central government contracts — Contracting departments 'may take into account any mitigating factors given as part of the supplier's response' — a well-prepared mitigation statement is your route to staying in the process.
4. Put an internal process in place to monitor your ongoing tax compliance and notify your contracting department promptly if your status changes — build this into your contract management routine.
SMEs that have won a £5m+ central government contract under this policy — Contracts must include 'clauses placing an obligation on the supplier to keep the department notified of changes in relation to its tax compliance', and failure to do so could trigger early termination.
5. Check whether your local authority or public sector buyer has adopted these tax compliance questions voluntarily — and if in doubt, prepare your self-certification answers as if they apply.
SMEs bidding for local government or wider public sector contracts ≥£5m — The PPN states that other contracting authorities 'may choose to apply the measures', so adoption is possible even though it is not mandatory outside central government.
Every rule below quotes the official document verbatim.
The tax compliance self-certification requirement applies to all central government contracts with a value of £5 million or more. (All suppliers bidding for central government contracts ≥£5m, from 1 April 2013)
“This policy applies to all suppliers (all 'economic operators' as defined by the regulations) bidding for all central government contracts. This includes framework agreements. of £5 million or more.”
The policy applies from 1 April 2013 and only covers tax returns submitted on or after 1 October 2012. (All central government contracts ≥£5m)
“From 1 April 2013 onwards a supplier must state whether any of its tax returns submitted on or after 1 October 2012 has: given rise to a criminal conviction for tax related offences which is unspent, or to a civil penalty for fraud or evasion”
Suppliers must self-certify for all members of a joint venture or consortium, but not for subcontractors, other supply chain members, or other group companies. (All suppliers bidding for central government contracts ≥£5m)
“Suppliers are not needed to certify on behalf of any subcontractor, any other members of the supply chain, any member of their group”
An Occasion of Non-Compliance (OONC) must have occurred within 6 years before the self-certification date, on or after 1 April 2013, and relate to a tax return submitted on or after 1 October 2012. (All suppliers bidding for central government contracts ≥£5m)
“to an OONC occurring in a period of 6 years before the self-certification date, but only where the OONC occurs on or after 1 April 2013 and is in respect of tax return submitted on or after 1 October 2012”
Where an OONC falls within mandatory exclusion criteria under procurement regulations, the contracting authority has no discretion and must exclude the supplier. (All central government contracting authorities, contracts ≥£5m)
“it should be noted that if an OONC falls within mandatory exclusion criteria under the Regulations then the authority will have no discretion.”
A supplier must declare if any tax return submitted on or after 1 October 2012 led to: a criminal conviction for a tax offence (unspent), a civil penalty for fraud or evasion, a successful HMRC challenge under the General Anti-Abuse Rule (GAAR) or 'Halifax' abuse principle, or the failure of a disclosed tax avoidance scheme (DOTAS). (All suppliers bidding for central government contracts ≥£5m)
“Question 1: The supplier must state whether, from 1 April 2013 onwards, any of its tax returns submitted on or after 1 October 2012 has: given rise to a criminal conviction for tax related offences which is unspent, or to a civil penalty for fraud or evasion”
A supplier is not considered to have been 'successfully challenged' by HMRC until all appeal avenues are exhausted. (All suppliers bidding for central government contracts ≥£5m)
“HMRC or an equal tax authority, will not consider to have 'successfully challenged' a supplier until all appeal avenues are completed.”
Contracts must include clauses allowing early termination if a supplier has an OONC, and requiring the supplier to notify the department of any changes in tax compliance. (All central government contracts ≥£5m, from 1 April 2013)
“Departments must make sure that for any procurements where the policy applies, the terms and conditions of the contract contains clauses which will allow them to end the contract if a supplier has had an OONC. There should also be clauses placing an obligation on the supplier to keep the department notified of changes in relation to its tax compliance.”
The policy does not apply to call-off contracts under existing framework agreements awarded before 1 April 2013, nor to extensions of contracts awarded before that date. (All suppliers; framework and legacy contracts)
“the policy does not apply to call off contracts made according to existing framework agreements (such as framework contracts awarded before 1 April 2013). It does not apply to extensions made to existing contracts awarded before 1 April 2013.”
For multi-supplier framework agreements, the policy applies only where individual call-off orders are anticipated to reach £5 million or more. (Multi-supplier framework agreements, central government)
“the policy applies to multi supplier framework agreements only, where it is anticipated that the value of any individual call-off orders or agreements for goods and services will be £5 million or greater.”
Local government and wider public sector bodies may voluntarily apply these rules to their own procurements over £5 million, but are not required to. (Local government and wider public sector — voluntary application only)
“Other contracting authorities (for example, in local government and the wider public sector) may choose to apply the measures set out in this PPN.”
The £5 million threshold was set deliberately to avoid placing administrative burden on lower-value procurements and small businesses. (All suppliers; policy design rationale)
“The £5m threshold has been set to avoid adding an administrative strain to lower value procurements and small businesses”
This briefing is enkii's interpretation of the official document — the official text always governs.
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