Users of extended supply chains such as the construction industry has been targeted by HM Revenue and Customs' Fraud Investigation Service (FIS) in a concerted attempt to identify fraudulent activity.
HMRC has confirmed that it is becoming increasingly concerned that supply chains are being infiltrated by those intent on abusing the tax system through the creation of “buffer” companies which, on the face of it, portray a compliant façade. However, what lurks beneath the water level is often a myriad of complex structures which must be investigated further.
Tax compliance is never far from the top of the business agenda. However, there has never been a more appropriate time to review and enhance your supply chain due diligence process to ensure it is both “active” and “meaningful” i.e. the right questions are being asked and all responses are thoroughly investigated.
Names like “Ablessio” and “Kittel” may be alien to many people but replace these names with words like “Deregistration” and “Liability” and the reason for comprehensive due diligence becomes ever clearer.
When VAT abuse has been identified, HMRC has the right to remove any associated business from the VAT register (“Ablessio”) and can also deny an input tax credit (“Kittel”) on the basis that the company officers “knew or should have known” that VAT abuse was present in the supply chain.
Indeed, HMRC has begun to use VAT Act 1994, s69 to levy civil penalties which, in certain circumstances, can be transferred to the officers of the company having regard to the degree of culpability.
Finally, let us not forget the Construction Industry Scheme (CIS) where compliance failures at any stage in the supply chain can lead to the cancellation of Gross Payment Status with immediate effect.
Given current market conditions, it is important to plan for every possibility and to leave nothing to chance.
Aspire Business Partnership ("Aspire") provide WK1 with practical and commercially sound advice in relation to all aspects of compliance, business strategy and conflict resolution. WK1 engage Aspire on a retained basis through which Aspire provide WK1 with advice on an ad-hoc basis.
