IEIM902540 - Due Diligence by Third Parties and other Platform Operators

Reporting Platform Operators (RPOs) can use a third-party service provider, including another Platform Operator (PO), to carry out their due diligence obligations. This may be appropriate where third party service providers have better resources or technologies to carry out the procedures.

Where there are multiple POs in respect of a particular Platform, any of the POs may carry out and complete the due diligence procedures on behalf of an RPO in respect of some or all of the Sellers of that RPO. In practice RPOs may agree amongst themselves that one PO will carry out the due diligence on behalf of all of them.

Where another PO carries out and completes the due diligence procedures on behalf of an RPO with respect to the same Platform, it may carry out the procedures based on the rules in the jurisdiction of the RPO or substantially similar rules in a partner jurisdiction. This ensures that a consistent and uniform approach is taken to due diligence procedures, particularly where there are multiple POs across a number of jurisdictions.

In cases where the RPO is relying on a third party, HMRC would expect the RPO to co-operate with the third party or other PO that has taken on the responsibility for carrying out due diligence. RPOs should put in place any necessary contractual arrangements appropriate in this scenario. These contractual arrangements should ensure that

• any information held by the RPO needed for due diligence is made available to the third party service provider or PO, and
• the RPO can obtain any information collected and verified on Sellers by the third party service provider or other PO so that the RPO can demonstrate it has complied with the due diligence requirements.

It is important to note that the RPO remains responsible for the completion of the due diligence procedures by the relevant deadline, even though it may rely on a third-party service provider or another PO to carry out them out. The RPO must therefore ensure that it has sufficient visibility, access and safeguards in relation to those due diligence procedures.

If the RPO and third parties do not co-operate appropriately, then information may not be properly collected or verified, resulting in incorrect or incomplete information being reported to HMRC. Where this is down to non-cooperation between the RPO and other parties, HMRC would not accept that there was a reasonable excuse for failing to carry out the due diligence or collect and report complete and correct information. Accordingly, a penalty may be due on the RPO.