MPs slam the award of government contracts to tax-avoiding IT firms

MPs have slammed the award of large government IT contracts to tax-avoiding companies such as Accenture, which is alleged to have used revenue from its deal with HM Revenue & Customs (HMRC) to reduce its tax bill.

In a Parliamentary debate, Ian Swales, Liberal Democrat MP for Redcar, said: “Is it right that Accenture, Capgemini and others win government contracts when they are named as aggressive tax-avoiders? Should HMRC itself have sold its buildings for leaseback to Mapeley, a Bermuda-based company? Is it not time that we recognised in financial assessments that most of the profits from private finance initiative and outsourcing contracts are now disappearing offshore?”

John McDonnell, Labour MP for Hayes and Harlington, said: “Accenture, which has a contract with HMRC to supply technical support, managed to reduce its tax bill to 3.5%, paying only £2.8m in tax on nearly £82m of profits in Britain last year. It was employed by HMRC and awarded a massive contract, and then used those resources to avoid paying tax. You couldn’t make it up, but it is happening regularly,” he said.

Both Capgemini and Accenture are two IT companies with which HMRC has contracts, and were singled out by MPs as tax-avoiders. 

“Capgemini, the lead contractor on the £8bn Aspire contract, paid only £308,000 of corporation tax last year on £38m of profits - less than 1%. That company is employed by HMRC but avoids the tax that HMRC seeks to use it to collect. It is extraordinary," said McDonnell.

“The government should introduce some principle to ensure that when we award contracts to such companies, we are at least confident that they are not in the tax avoidance business.” 

Swales added: “In December, Eric Schmidt, chief executive officer of Google, said that he was proud that his company had avoided $2bn of corporate income taxes worldwide in the last year. We have a crisis - a growing crisis of our national tax system operating in an international business environment.

“The government have fuelled the frenzy by doing private finance initiative and outsourcing deals with tax avoiders. We must also consider whether we can trust our media to report all this fairly, given that most of our national newspapers and their owners are themselves engaged in some form of tax avoidance,” he said.

Swales also questioned whether Amazon should get more than £10m of government money for a new warehouse in Dunfermline when it is a Luxembourg-based retailer paying little corporation tax in this country, and apparently does not pay VAT on all its sales.

Nick Gibb, Conservative MP for Bognor Regis and Littlehampton, described Amazon’s European status as a Luxembourg-based company was a "legal fiction" in order for it to classify its billions of pounds of sales in the UK as just £207m to avoid paying tax.

“All the real economic activity for the transaction of my book purchase takes place in the UK,” he said. “If I want further details on my statutory rights, I should contact Amazon.co.uk customer services at 2 to 4 Waverly Gate, Edinburgh. The trading name for the Luxembourg company therefore has premises in Edinburgh. Does that not sound like a permanent establishment of the Luxembourg company?”

An Accenture spokesman told Computer Weekly the firm denies allegations of tax avoidance, he said the claims were inaccurate, as the company will pay £12.7m in corporate taxes deferred to a later period.

"It is not correct that in 2011 we reduced our tax bill to 3.5%, paying only £2.8m in tax on nearly £82m of profits. On profits of £81.8m the tax charge at the effective statutory rate of 27.16% gives £22.2m. Our current tax charge was reduced by deductions and losses brought forward and other timing differences to a current tax charge of £2.8m. All of this can be verified through our filings with Companies House," he said. 

In the original version of this story we reported the  figure quoted in Hansard claiming Accenture has a £9.6bn deal with HMRC. However, Accenture has informed us that the figure in Hansard is incorrect and should in fact be £9.6m. We have removed reference to the figure while clarification is being sought with Hansard.