HMRC has disallowed VAT recovery of £46 million and withdrawn the VAT registration of a recruitment sector intermediary, alleging that it knew, or should have known, that mini umbrella companies (‘MUC’s) it used to supply temporary staff were involved in VAT fraud.
As this is a preliminary ruling, the full details are yet to emerge, but it flags that HMRC could deny input tax recovery to those who they believe are aware, or should have been aware, that their supply chain include entities who could avoid remitting VAT owed .
Whilst this is an extreme case, it highlights the importance for recruiters and intermediaries to review, address the risks and implement safeguards in respect of their supply chain.
Source FTT via RSM
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