1. Although I am unaware of the precise details save for those reported in the Independent on 8 February 2016, it appears that Bristol CCG are proposing to amend their constitution owing to their concern that it may offend against the provisions of the Public Contracts Regulations 2015. Bristol was one of a number of CCGs that adopted some or all elements of a model constitution proposed by 38 Degrees in 2013. It appears that they fear legal challenge in the event that they exclude bidders on grounds of tax avoidance and seek to remove the clause in their constitution which provides that it, the CCG:


“will, in each procurement and consistently with relevant EU and international law, ensure that contractual provisions, procurement procedures and selection and award criteria prohibit or restrict contractors’ use of offshore jurisdictions and/or improper tax avoidance schemes or arrangements and/or exclude companies which use such jurisdictions and/or such schemes or arrangements”.


  1. This is not a new issue. In 2013, Hackney CCG also considered amending their constitution for the same reasons and I was asked to advise 38 Degrees at that time. I attach that advice for ease of reference because it remains applicable. In essence nothing has changed since 2013 which causes me to resile from or reconsider my opinion. The key points of that advice are these:
  • the relevant clause of the constitution proposed by 38 Degrees contains the caveat that the CCG must act consistently with their legal obligations but express an aspiration as to the manner in which it will conduct itself;
  • the constitution is therefore capable of evolving with the law as it develops in relation to tax avoidance (but cannot override the current legal obligations of the CCG under procurement law);
  • there is nothing in the constitution which requires the CCG to act in any manner contrary to its legal obligations;
  • although I would agree that it would be discriminatory to exclude or mark down bidders simply on the basis that they arrange their affairs in a manner which leads them to pay tax in a jurisdiction other than the UK there may well be ways in which objective selection or award criteria can be employed with encourage responsible tax treatment and payment of tax in the UK but it may well be that imposing contractual requirements as to future tax conduct hold the key to eliminating tax avoidance rather than employing exclusionary criteria relating to past or current tax arrangements;
  • there are litigation risks involved in dealing with tax avoidance in procurement but the 38 Degrees formulation of the CCG constitution affords scope and flexibility to introduce creative criteria or contractual requirements as the legal landscape evolves.


  1. It is true that new Public Contract Regulations 2015 are now in place (and enter into force on 18 April 2016 in relation to the procurement of healthcare services). In relation specifically to the non-payment of taxes, those Regulations require contracting authorities to exclude bidders guilty of tax offences and where the contracting authority is aware that the economic operator is in breach of any of its obligations relating to the payment of taxes or social security contributions (and the breach has been established by a judicial or administrative decision having final and binding effect). The Regulations give a discretion to contracting authorities to exclude an economic operator from participation in a procurement procedure where the contracting authority can demonstrate by any appropriate means that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions.


  1. In my view these provisions do not restrict or extend the ability of contracting authorities to exclude bidders on grounds of tax avoidance beyond the scope of the provisions which existed in 2013. Nor do they affect the formulation of contract award criteria which, according to the 2015 Regulations, may include social aspects.


  1. In conclusion therefore, I remain of the view that the inclusion in CCG constitutions of the “tax avoidance” provision promoted by 38 Degrees does not of itself place the CCG in any unlawful position and need not be amended on those grounds. As with all individual procurements, however, a reasonable construction of the relevant Regulations must be observed both in the formulation of the procurement criteria and in the execution of the selection and award process.



25 February 2016