For the first time since June 2023, HMRC has updated their list of people involved in VAT fraud.
This is of particular interest for recruiters as we finally see a promoter of Mini Umbrella Company (MUC) fraud being publicly named by HMRC.
Even today, MUC is being promoted to recruiters concerned about the increase to Employers NI costs coming in April 2025. As stated in HMRC’s guidance “Where we’ve established that a business in the supply chain knew, or should have known, that there was fraud, we’ve taken steps to:
- deny other businesses in the same labour supply chain the right to recover VAT input tax
- transfer liability for any associated penalties to the company officer”
In this case, the penalties, exceeding £1.1 million, cover a period from June 2019 to August 2021 and have been assigned not just to the business but also to the proprietor. Under the Kittel Principle HMRC are empowered to also transfer liabilities up the supply chain to organisation that “knew or should have known” that fraud was occurring below them in the supply chain, including where offers have been made which are “too good to be true”.
The structure of this liability transfer to an agency caught up with such a provider is to deny their input VAT claimed for payments made to the MUC, the cost of which far exceeds the savings made by the agency.
This action, along with the recent The Commissioners for HMRC v Ducas LTD & Ors judgement where an estimated 30,000 medical staff supplied to the NHS have been engaged via their own Ltd Company despite being inside IR35 resulting in an Employers NI liability exceeding £171 million, demonstrates the teeth that HMRC are showing against non-compliant intermediaries.
