HMRC: labour providers due diligence

New European Court of Justice confirmation

HMRC have identified increasing problems with fraud and unpaid taxes through the use of labour providers in the agricultural and food processing sectors, construction, hotels and leisure, security and other labour intensive industries.

The European Court of Justice has confirmed that input tax recovery of VAT should be denied where transactions are connected with the fraudulent evasion of VAT and the person claiming input tax either knew or should have known of that fact.

This principle, known as the Kittel principle, has been clarified and endorsed by the Court of Appeal in the UK.

Examples of checks to consider are enclosed in the HMRC leaflet, 'Use of Labour Providers' - advice on due diligence which can be found here.

Posted by on 27 January 2014.