HMRC Kittel Investigations – Early Intervention Essential

CTM was instructed by AB Cleaners Limited, a large contract cleaning business employing some 600+ office cleaners.

Having previously sourced its own staff and managed its own payroll, the company was cold called by a broker who recommended a business that could manage both the supply of labour and the associated payroll services at very little cost.

The cleaning company agreed and began outsourcing these services, however, the supplier later ceased to trade due to financial issues. The same broker recommended 4 such suppliers, all of which closed in unusual circumstances. We are seeing this pattern in many cases, and it is generally associated with poor performance levels.

VAT fraud was later linked to the 4 businesses, resulting in a tax loss of over £1.5million.

Once HMRC have identified VAT fraud and commenced an investigation, do not simply answer the questions they want answered, but present them with all the positive aspects of your case before a decision is reached.

Once HMRC conclude their investigation, they will need to decide whether to deny input tax or not and they will consider if they are likely to succeed if the decision is appealed to Tribunal.

CTM has specialised in Kittel appeals for 16 years and is well placed to present the strongest possible case before a decision is reached. This includes drafting a detailed report into the positive aspects of the trading and due diligence procedures of the company.

That is exactly what we did in this challenging case and HMRC ended the investigation shortly after. Without this approach, HMRC would very likely have denied the input tax.

Once a Kittel decision is reached, it is unlikely HMRC will withdraw it, with a lengthy Tribunal process the outcome.

Directors may also be held liable to a penalty equal to 30% of the tax losses. £450,000 in this case if CTM hadn’t intervened.

CTM provide a full review of all cases at no cost, and you should contact if you have any questions.

2023-12-08T14:42:16+00:00 December 8th, 2023|HMRC Procedure|