Of the 65 bids for contracts above £5m during the year, only one potential bidder failed the overriding mandatory procurement test, and this was due to the bidder being unable to provide and deliver services that would fulfil the procurement department’s contract, rather than an issue of whether or not they were tax compliant, said the government statement.

The remaining 64 potential bidders self-certified that they had been tax compliant.

The government says the signs are that a new tax and procurement policy introduced last year to encourage tax compliance from potential suppliers is working, with companies which want to do business with government departments complying with the requirement to demonstrate that their tax arrangements are in order before bidding.

Under the new rules, any business seeking a government contract of £5m or more must self-certify that they have not submitted an ‘incorrect’ tax return as a result of engaging in tax evasion or tax avoidance which is discovered as a result of either litigation or admission.

If the business cannot certify a ‘clean’ record, government departments have the discretion to exclude them from the procurement process.

The key provision is that a supplier must state whether, from 1 April 2013 onwards its tax affairs have given rise to a criminal conviction for tax related offences which is unspent, or to a penalty for civil fraud or evasion; and/or any of its tax returns submitted on or after 1 October 2012 has been found to be incorrect as a result of:

• HMRC successfully challenging it under the new General Anti-Abuse Rule (GAAR) (contained in Part 5 of the Finance Act 2013) or the "Halifax" abuse principle; or
• a tax authority in a jurisdiction in which the supplier is established successfully challenging it under any tax rules or legislation in any jurisdiction that have an effect equivalent or similar to the GAAR or the "Halifax" abuse principle; or
• the failure of an avoidance scheme which the supplier was involved in and which was, or should have been, notified under the Disclosure of Tax Avoidance Scheme (DOTAS) or any equivalent or similar regime in any jurisdiction. This only applies in relation to a DOTAS scheme which a supplier has used in relation to its own tax return.

The review carried out by HMRC and the Cabinet Office found that ‘early indications are that those wishing to bid for relevant contracts are very mindful of the need to be tax compliant’.

More information on the detail of the policy is contained in the Cabinet Office Procurement Policy Note: Measures to Promote Tax Compliance (Action Note 06/13), published on 25 July 2013.