Kittel Notice

To speak to someone about this at Gilbert Tax Craig Tully is the dedicated partner so please email him directly at craig.tully@gilberttax.co.uk call 07786 226013 or fill in the contact form and he will get back to you as soon as he can.

Notice to deny input tax & supply chain investigation

If you have received a letter from HMRC that says you are under supply chain investigation, they are querying your VAT due diligence process  or an assessment from HMRC that says ‘notice to deny input VAT’ and refers to a tax case called ‘Kittel’ then HMRC believe that you have been involved with transactions where VAT has been lost and you knew or should have known that the VAT would not be paid due to the fraudulent evasion of VAT.

This is exceedingly complex and we recommend that the business who receives the notice take immediate action and contact someone who deals with supply chain investigations and Kittel issues on a regular basis.

In effect, HMRC are telling you that they are going to deny your business the input tax you previously claimed in this transaction and expect your business to pay that VAT back to them, immediately!

If this is not dealt with as a matter of urgency by someone who is familiar with all the supply chain and Kittel issues this could cause significant financial harm to your business and potentially you personally if HMRC issue penalties.

These are very complex cases and any ongoing supply chain investigation needs to be carefully managed as it can become very disruptive to your business.

Any Kittel notice issued by HMRC should be appealed against without delay, even if your appeal is not fully complete it is important to register your disagreement in principle within the deadline stated on the notice.

Although late appeals can be allowed, they present a problem in themselves and can be complex and costly to deal with.
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The points HMRC need to prove

In these cases there are three points for HMRC to prove, although they appear straightforward the underlying detail and understating of the law is important.

The tests are as follows:

1. Was their fraudulent evasion of VAT?  This does not have to be in your business it is usually in another business HMRC are aware of.
2. Was the transaction entered into by your business ‘connected with’ that fraudulent evasion of VAT?  This can be buy entering into a transaction with a third party.
3. That you or your business, when it entered into the transaction, knew or should have known that it was ‘connected with the fraudulent evasion of VAT’.  HMRC often try to say that processes were not robust enough to check that the transaction was not fraudulent.

HMRC frequently assert that the above tests are passed without any proper investigation to obtain relevant facts.

Therefore you are presented with a ruinous demand for money without any proper enquires being carried out by HMRC.

Having an advisor who is familiar in dealing with Kittel issues and HMRC’s lack of fact finding can make all of the difference as if such allegations are not quickly and robustly challenged this can lead to issues if the matter needs to progress to Tribunal.
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How Gilbert Tax can help

Gilbert Tax have extensive experience of dealing with these demands and notices including reviewing evidence presented by HMRC and examining the way HMRC have carried out their investigation so that negotiations can commence to deal with the problem.

If HMRC are intransigent, then we also have the back up for experienced Solicitors and Counsel (Barristers) on this issue should it be necessary to take HMRC to the Tax Tribunal.

It is important that anyone involved in a supply chain investigation or receiving a Kittel assessment takes immediate action to give you and your business the best challenge of defending these claims.

We are aware that sometimes people think that they can deal with the notice themselves and that HMRC will be reasonable as they do not want to incur professional costs.

Our experience is that HMRC are not reasonable with regards to Kittel notices and without experience and knowledge of the full process businesses get themselves further into difficulties as their explanations are twisted to support HMRC argument.

In the matter of supply chain investigation and Kittel assessments, we would suggest that you cannot afford not to get professional help.
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To speak to someone about this at Gilbert Tax Craig Tully is the dedicated partner so please email him directly at craig.tully@gilberttax.co.uk call 07786 226013 or fill in the contact form and he will get back to you as soon as he can.