As well as engaging sole trader subcontractors, we also provide a solution where we engage Limited Company subcontractors.

Recently, HMRC have targeted labour supply chains to identify fraudulent activity.  Due to this, it is imperative that thorough due diligence of the supply chain is undertaken when engaging Limited Companies.

Failure to undertake the correct due diligence can result in the loss of your Gross Payment Status and in some cases, can even result in HMRC deregistering your Company for VAT.

If you engage Limited Company subcontractors that are VAT Registered, there is a very present and real danger of being caught in a supply chain where VAT abuse is present. In such circumstances, HMRC can deny any input tax your Company claimed (the ‘Kittel Principle’) and they can also remove your business from the VAT register, cancelling your Company’s VAT Number (the ‘Ablessio Principle’).  HMRC can exercise these powers on the basis that the company “knew or should have known” that VAT abuse was present in the supply chain.

HMRC have also began to use the s69 of VAT Act 1994 to issue civil penalties to companies, which in certain cases, can be transferred to the officers of the Company if they deem them to be culpable.

Due to these risks, it is vital that correct Due Diligence is undertaken for every subcontractor you engage.  Riddingtons have a wealth of knowledge and experience in this area. By placing your Limited Company subcontractors with us, we undertake all the necessary due diligence required.  This ensures you are insulated from the consequences of labour supply chain.

If you need further information or wish to discuss any of these points raised; please feel free to contact us.