14/11/22

HMRC Kittel Assessments & Appeals | ‘Suspicious or Dubious’ Activity | Kangs Tax Investigation Solicitors

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We continue our series of articles on the Kittel Principle having recently published the following articles:

In this article Hamraj Kang of Kangs Solicitors discusses and highlights some of the recent issues that have arisen in the Kittel appeals conducted by Kangs Solicitors.

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 has conducted in excess of one hundred Missing Trader/Kittel cases and is recognised as a leading expert in the field of criminal fraud investigations. He is one of only two solicitors nationally to be ranked as a ‘star individual’ for six 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 call our Team at any of our offices detailed below:

HMRC Allegations | What is a HMRC Kittel Case Based On? | Kangs VAT Fraud Defence Solicitors

Our experience, gained from involvement in numerous Kittel Principle Appeals, reveals numerous factors upon which HMRC may rely when exercising the Kittel Principle against a company.

HMRC will usually cite a number of trading factors present that it considers ‘suspicious or dubious’ and the presence of which would render the company guilty of either ‘knowing’ that its transactions were connected with the fraudulent evasion of VAT or that ‘the only reasonable explanation’ for the nature of such transactions was that they were connected with the fraudulent evasion of VAT.

Examples of ‘Suspicious or Dubious’ Activity | Kangs VAT Investigations Solicitors

From the many cases conducted by Kangs Solicitors, we can identify some of the potentially suspicious activity or circumstances deemed worthy of investigation by HMRC:         

  • The situation where a company has a history of involvement in trading chains which has led to VAT loss, not by the company itself failing to account for its own VAT liability, but due to another trader in the chain failing to account for their VAT liability. In some instances, before the Tax Tribunal, HMRC has sought to rely on a company’s ‘previous bad character/poor conduct’ even though the issue in question before the Tax Tribunal does not relate to the earlier trading covered by the ‘poor conduct’.
  • Where HMRC is able to demonstrate the artificiality of the transactions relying on, for example, the unorthodox or unrealistic methods by which the company and its trading chain partners make contact. 
  • Inadequate or non-existent trade references and background checks conducted by the company on its trading partners.
  • The assumption by the company that large volume transactions can be conducted from the outset rather than by conducting any form of diligence by engaging in any test purchases or allowing for a ‘settling in’ period. 
  • The trading scheme only being in existence for the purpose of evading VAT.
  • Lack of required VAT ‘due diligence’ conducted by the company or producing material which is deemed to be ‘window dressing’.
  • Failure to take action in relation to ‘red flags’ such as provision of inconsistent VAT Registration Numbers, residential addresses appearing on business invoices, production of incorrect VAT Trade classifications on VAT Certificates etc.
  • Lack of basic commercial documents such as Contracts, Terms of Business, Retention of Title provision and Payment Terms in all sectors, particularly those which HMRC deems as high tax loss sectors (such as construction).
  • Lack of any normal commercial activity, such as price negotiation, generally producing uniform mark ups and profit margins for all traders clearly evidencing centrality of control of the trading chain.
  • Failure to provide any form of insurance such as for seemingly valuable goods in transit.
  • The company’s position in the supply chain remaining consistent and unaltered irrespective of other traders appearing, or intermittently disappearing, in the trading chain from time to time.
  • Failure by the company to follow HMRC written guidance in ‘high-risk’ sectors and to follow advice provided in face-to-face meetings with HMRC officers.

All of the above are case specific and can often be rebutted by the company or trader made the subject of a VAT Assessment under the Kittel principle.

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, it is essential that you seek immediate expert advice as strict time limits may govern your time for submitting a detailed response.

Our experienced Team will be pleased to assist and provide detailed guidance regarding all aspects of HMRC investigations from the outset to Tax Tribunal or potential criminal proceedings.

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 Kang

Email Hamraj

07976 258171

020 7936 6396

0121 449 9888

John Veale

Email John

0121 449 9888

020 7936 6396

0161 817 5020

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