Know your supplier
‘Know your customer’ is a good maxim for doing business. The VATman has issued a warning to businesses who use temp or agency staff – know your supplier.
A few years ago, the big VAT fraud involved selling mobile phones or computer chips to someone, charging them VAT (which they would reclaim) and disappearing before HMRC could collect the money – a ‘missing trader fraud’. These days, people are more wary of these areas of business, and HMRC reckon that there is a risk in the sub-contract labour business – supply of staff is a standard rated VATable supply, so businesses may pay VAT to agencies and expect to be able to claim it back as input tax. If the agency has disappeared without paying HMRC, HMRC may not be happy to hand the input tax over.
They suggest a long list of sensible commercial checks to carry out, similar to the advice they give to anyone dealing in mobile phones – don’t take the supplier at face value, but make sure they are genuine. HMRC think there’s a particular risk this year with the London Olympics likely to drive up demand for temporary staff – if you want to discuss how to protect yourself, we can advise you.