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HMRC internal manual

VAT Fraud

What to consider prior to determining whether to use an intervention: getting to know the business: comparing and contrasting different business streams

Having documented both the market (VATF32100) and the way the business is run (VATF32200) it is essential that all of the taxable person’s trading activities are looked at and compared and contrasted with one another, so that any differences can be identified. For example, you should compare and contrast:

  • the model, quantity, specification etc of goods and services for the different business streams, tracing back to manufacturers or authorised distributors to those traced to other sources, and in particular the extent to which precise specifications are quoted on invoices, purchase orders etc;
  • the timing, number and value of the different transactions in the different business streams;
  • the differences in the way the goods are handled and services performed for the different streams (e.g. some goods are kept on site whilst others are held in a separate third party warehouse; certain goods put into stock using serial numbers but no serial numbers of goods in others; detailed inspection of some goods but no / limited inspection of goods used in others, etc);
  • the differences in payment terms and the reasons for these differences;
  • if there are separate bank accounts used set out, details for their use and reasons given by the trader for having separate accounts;
  • the differences in contracts, terms and conditions and insurance and the reasons given by the taxable person for any differences; and
  • the differences in the type and quality of due diligence / risk assessment undertaken (VATF70000).

The above list is not exhaustive.

The important thing to remember is that if the business has more than one operating model those differences need to be highlighted and explanations provided by the taxable person (if any).