The Kittel Principle derives from the European Court of Justice judgement in the case of Axel Kittel & Recolta Recycling SPRL.
HMRC may deny the taxpayer the right to deduct input VAT :
However, there is a burden of proof for the HMRC to establish that a tax loss has occurred and that it was the result of the above. Should the HMRC be able to do so, then the directors of the company may be held personally liable for the tax loss assessed and the company may be removed from the VAT register.
The HMRC are not permitted to adopt a generalised and somewhat subjective opinion on a company’s transactions but should be required to look at each transaction. Furthermore, inadequate due diligence procedures of the company should not be the only evidence used to show that the company knew or should have known that they were involved in the fraudulent evasion of VAT.
If not dealt with as a matter of urgency, a Kittel Notice could cause significant harm to your business and potentially you personally if HMRC issue penalties. Please contact Davidsons Forensic Accountants at email@example.com should you require any assistance.
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