News
Kittel VAT: How to control the uncontrollable
25 June 2025
Receiving a Kittel VAT notice is something that many businesses dread.
HM Revenue and Customs (HMRC) can demand the repayment of tax already reclaimed, and this can sometimes amount to a significant amount of money.
The notice comes when a trader “knew or should have known” their transaction was linked to fraudulent evasion of VAT.
This makes it ineligible for a deduction of input tax.
Kittel VAT can seem like an ever-present threat hanging over traders, but there are ways to reduce the risk.
How do Kittel VAT notices get issued?
To issue a Kittel VAT notice, HMRC must establish three key elements. They need to determine that:
- VAT was fraudulently evaded
- The trader’s transaction was connected with that fraud
- The trader knew, or ought to have known, of this connection
If any of these components is missing, a Kittel VAT notice will not be issued.
The European Court of Justice (ECJ) judgement in the case of Axel Kittel & Recolta Recycling SPRL is the originator of the term, and the ruling left the exact definition of “knew or should have known” undefined.
Defining the term could have opened loopholes that businesses may have attempted to exploit, which could have jeopardised HMRC investigations.
How to avoid Kittel VAT notices?
Due diligence is the best way to avoid Kittel VAT notices.
Conducting the necessary checks that should be part of your anti-money laundering processes should allow you to avoid engaging with conduct that will leave you vulnerable to Kittel VAT notices.
You should, therefore, always conduct robust supply-chain due diligence and ensure you understand the nature of all transactions made by your business.
If you ever have any doubts, it is best to raise concerns immediately, as it may not just result in a Kittel VAT notice, but more severe instances of fraud.
You may be treated as an accomplice to this fraud if you do not perform sufficient due diligence.
Reduce the threat of the Kittle VAT Notice, speak to our team today.
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