The Ablessio Principle | VAT Fraud | HMRC Investigations Solicitors
HMRC is allowed to deregister a company from VAT where that company has been using its VAT Registration Number for fraudulent purposes. This power derives from the European Court of Justice case of Valsts ieņēmumu dienests v Ablessio SIA C-527/11, (‘the Ablessio principle’).
Amongst the various forms of Notice of VAT Assessment which HMRC may serve on a company is one based upon the Ablessio principle.
When an Ablessio Notice has been received, it is absolutely essential that immediate action is taken as non-compliance can have a devastating impact on any business.
The Team at KANGS is highly experienced guiding and assisting clients and will be pleased to assist regarding all aspects of HMRC Investigations from the outset to any subsequent Tax Tribunal, civil or criminal proceedings which may ensue.
KANGS is led by Senior Partner, Hamraj Kang, who is recognised as a leading expert in the field of fraud investigations. He is one of only two solicitors nationally to be ranked for as a ‘Star Individual’ for ‘financial crime’ for last eight consecutive years in the legal directory Chambers UK.
For an initial no obligation discussion, please call our Team at any of our offices detailed below:
What is the Ablessio principle? | KANGS VAT Investigations Solicitors
The Ablessio principle allows HMRC to deregister a company from VAT where that company has been using its VAT Registration Number for fraudulent purposes such as:
- non-payment of VAT, where lawfully due;
- participation in transactions which the company should reasonably know are connected with fraud by, for example, conducting business with a supplier which is also evading VAT; or
- intending to commit VAT fraud or become part of a fraudulent scheme.
HMRC VAT Investigation | MTIC VAT Fraud Defence Solicitors
HMRC often implements the Ablessio Principle when seeking to dismantle business arrangements where it believes a taxpayer knew, or should have known, that VAT fraud was being conducted.
However, irrespective of the fact that the company against which the Ablessio Principle is enforced may well have been unaware that the fraud was being committed, the action taken by HMRC is extremely likely to cause financial and reputational loss.
When conducting an Investigation, HMRC will be extremely thorough and it has listed some of the questions which will be raised in HMRC Internal Manual, VATF44500:
- Are the trader’s transactions connected with VAT fraud? Can we evidence this?
- Do either the directors or other members of staff of the trader have any previous connections with missing trader fraud or other VAT fraud?
- Is there a credible business model?
- Does the trader advertise their goods and services?
- Are there any issues with the premises, i.e. is it suitable to carry out the type of trade?
- Are there inconsistencies on the VAT registration form?
- Do the transactions show features of contrivance, such as pre-arranged profit margins?
- Are there terms and conditions and are they followed?
- Has the trader used written contracts?
- Has the trader insured the goods?
- Are there any irregularities with the way payment is made? For example the use of alternative banking platforms or large cash payments?
- Has the trader undertaken appropriate due diligence checks on counterparties?
- Is there evidence to show that the trader is involved in an overall scheme with the primary aim of defrauding the public revenue?
This list in non-exhaustive.
HMRC can straightforwardly prove whether a taxpayer knew of VAT fraud by the production of positive and supportive evidence.
The test for whether a taxpayer should have known of the fraud is ambiguous and was considered in Davis & Dann Ltd v HMRC  which held that a taxpayer must have been unable to come to any reasonable conclusion other than the nature of the business transactions were designed to commit fraud.
HMRC cannot simply rely on the taxpayer’s circumstances as evidence that fraud should have been suspected given that, more likely than not, the transactions were connected to fraud.
In addition to the fraudulent activity of a company, HMRC will also examine the conduct of its directors in order to establish any fraudulent involvement.
Where HMRC has deregistered a company from VAT, it may take further action, such as:
- issuing VAT Assessments for the amount of VAT it believes should have been paid,
- denying the company’s right to deduct input tax (see ‘The Kittel Principle’)
- issuing Penalty Notices to the company,
- making company officers personally liable for the VAT debt,
- commencing a Criminal Prosecution.
Who Can I Contact for Advice & Help?
The Team at KANGS is experienced in challenging assessments and decisions issued by HMRC of every nature.
A company deregistered for VAT will no longer have a VAT Registration Number, meaning that it will effectively be unable to trade, and will need specialist advice in order to avoid the insolvency process.
If you have received indication of any activity of any sort by HMRC, including that of de-registration for VAT, our Team can advise you on your position and upon the appropriate course to adopt, and will guide you through any subsequent court action whether civil or criminal.
It is essential that you seek immediate expert advice as strict time limits may govern your time for submitting a detailed response to any Notification or VAT Assessment received from HMRC.
Please do not hesitate to contact the Team at KANGS through any of the following:
Telephone: 0333 370 4333
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.