LPOG4500 | Interventions: education and due diligence: due diligence

Legal Definition of Due Diligence: Reasonable steps taken by a person to avoid committing a tort or offence.

A warning about VAT Fraud: Where it can be shown that a trader knew or should have known that transactions they entered into were connected with any fraudulent evasion of VAT, they will lose their right to recover the VAT incurred on those transactions.

It is good commercial practice for all businesses to carry out checks to establish the credibility and legitimacy of their supplies, customers and suppliers. However, these checks will need to be more extensive in business sectors where there are greater commercial risks or vulnerability to fraud and other criminality

A failure to carry out appropriate checks will be one of the factors that HMRC will take into account in considering whether a trader knew or should have known of the fraud.

For further guidance see VATF70000 and Use of Labour Providers: Advice on Due Diligence leaflet (PDF 316kb)