»Ê¹ÚÌåÓýapp

Examples of the types of due diligence that a taxable person could undertake are set out in Notice 726, paragraphs 6.1 and 6.2, which is itself discussed at VATF73000.

»Ê¹ÚÌåÓýapp important thing to remember is that merely making enquiries is not enough. »Ê¹ÚÌåÓýapp taxable person must take appropriate action based on the results of those enquiries. »Ê¹ÚÌåÓýapprefore, for example, if the taxable person has undertaken effective due diligence / risk assessment on its supplier and that due diligence / risk assessment shows one or more of the following results in relation to the supplier:

• only been trading for a very short period of time,
• managed to achieve a large income in that short period of time,
• a poor credit rating,
• returned only partly completed application or trading forms,
• contacted the taxable person out-of-the-blue etc,

and yet the taxable person still goes ahead and trades without making any further enquiries, this could lead to the conclusion that the due diligence / risk assessment was casually undertaken and of no value.

»Ê¹ÚÌåÓýapp above example, when considered alongside the circumstances of the transactions (VATF60000), could help to establish:

1. that the taxable person �knew� of a connection with fraud, because he has merely gone through the motions of carrying out due diligence / risk assessment, with no real intention of acting on the results; and/or
2. that the taxable person �should have known�, because he has ignored indicators that should have led him to conclude that connection with fraud was the only reasonable explanation for the transactions being offered.