Company Officer Liability


Whilst the general position is that the personal liability of directors of a limited company is limited, hence one of the main attractions of trading through a company, exceptions exist.

One of these exceptions involves HMRC which is alert to any attempt to avoid paying tax, whether it be deliberate or otherwise and directors need to be alert to ‘missing trader fraud’ given that, if any VAT irregularities are discovered, HMRC will seek to recover not only unpaid tax but interest and, frequently, impose financial penalties upon company officers personally.

In previous articles posted to this website entitled:

we have explained how HMRC enforces the Kittel Principle (‘the Kittel Principle’) to deny the right to input tax on VAT returns, the consequences of such denial and the taxpayers right to review such decisions.

When exercising the Kittel Principle in the pursuit of unpaid VAT in circumstances where VAT fraud is suspected, HMRC has the support of legislation in order to seek recovery from company directors.

John Veale of Kangs Solicitors now comments on this legislation available to HMRC.

The Team at Kangs Solicitors offers vast experience and is highly regarded nationwide for assisting clients facing investigations by HMRC of every nature including the exercise by HMRC of the Kittel Principle.

Our Team is led by the Senior Partner Hamraj Kang who is recognised as a leading expert in the field of criminal fraud investigations including VAT/Kittel Assessment cases. He is one of only two solicitors nationally to be ranked as a ‘star individual’ for seven consecutive years in the legal directory Chambers UK.

Other members of the Team are ranked in Chambers UK and the Legal 500.

For an initial no obligation discussion, please contact our team at any of the offices detailed




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The Kittel Principle | Company & Director Liability | Kangs HMRC Kittel Investigations Solicitors


The Value Added Tax Act 1996 states at section 69C:

Transactions connected with VAT fraud

(1.) A person (T) is liable to a penalty where—

(a) T has entered into a transaction involving the making of a supply by or to T (“the transaction”), and

(b) conditions A to C are satisfied.

(2) Condition A is that the transaction was connected with the fraudulent evasion of VAT by another person (whether occurring before or after T entered into the transaction).

(3) Condition B is that T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person.

(4) Condition C is that HMRC have issued a decision (“the denial decision”) in relation to the supply which—

(a) prevents T from exercising or relying on a VAT right in relation to the supply,

(b) is based on the facts which satisfy conditions A and B in relation to the transaction, and

(c) applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice).

(5) In this section “VAT right” includes the right to deduct input tax, the right to apply a zero rate to international supplies and any other right connected with VAT in relation to a supply.

(7) The penalty payable under this section is 30% of the potential lost VAT.

(8) The potential lost VAT is-

(a) the additional VAT which becomes payable by T as a result of the denial decision,

(b) the VAT which is not repaid to T as a result of that decision, or

(c) in a case where as a result of that decision VAT is not repaid to T and additional VAT becomes payable by T, the aggregate of the VAT that is not repaid and the additional VAT.’

Company Officers

HMRC must show that a director ‘knew or should have known’ that the transactions in question were connected with the fraudulent evasion of VAT.
Accordingly, it is essential for everyone involved within a company to be aware of the nature, warning signs and potential risks of missing trader fraud.

The Value Added Tax Act 1996 states at section 69D:

‘Penalties under section 69C: officers’ liability

(1) Where-

(a) a company is liable to a penalty under section 69C, and

(b) the actions of the company which give rise to that liability were attributable to an officer of the company (“the officer”),

the officer is liable to pay such portion of the penalty (which may be equal to or less than 100%) as HMRC may specify in a notice given to the officer (a “decision notice”).

(2) Before giving the officer a decision notice HMRC must-

(a) inform the officer that they are considering doing so, and

(b) afford the officer the opportunity to make representations about whether a decision notice should be given or the portion that should be specified.’

Our Recent Experience | VAT Assessments | Kittel Investigations

We are currently instructed by numerous companies operating in the construction sector where HMRC allege VAT fraud in the supply chain. There has clearly been a surge in such cases in recent months.

Despite the reverse charge being introduced in the construction industry on 1 March 2021, HMRC still, in certain circumstances, use the Kittel Principle to make Assessments on historical VAT returns where it suspects that there has been fraudulent evasion of VAT within the trading chain.

Who Can I Contact for Advice & Help? | Kangs National Fraud Offences Defence Solicitors

If you, your business, or both, are, or become, subject to any form of investigation by HMRC, including one involving the exercise of the Kittel Principle,(<VAT ASSESSMENTS PAGE>) it is essential that you seek immediate expert advice as strict time limits may govern your time for submitting a detailed response.

If you are advised, as a company officer, that HMRC is considering making you personally liable for any penalties, as you are limited in time to make your representations by way of objection to liability for the whole or part of the amount claimed, it is essential that you seek immediate leal advice.

If we can be of assistance, our Team is available via telephone 0333 370 4333 and by email info@kangssolicitors.co.uk.

We provide initial no obligation discussion at our three offices in London, Birmingham and Manchester.

Alternatively, discussions can be held virtually through live conferencing or telephone.


Hamraj Kangs 0340 BW scaled e1690223799706

Hamraj Kang

Email Hamraj

07976 258171

020 7936 6396

0121 449 9888

John Veale 1

John Veale

Email John

0121 449 9888

020 7936 6396

0161 817 5020

Tim Kangs 0035 BW scaled e1690222566960

Tim Thompson

Email Tim

0121 449 9888

020 7936 6396

0161 817 5020

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