Contrivance: Other indicators
Market based indicators that point to contrivance
If the taxable person failed to investigate other sources of supply this might be viewed as an indicator of contrivance as in a commercial transaction businesses would call round a number of suppliers to source goods at the cheapest available price.
Long supply chains without added value might also point towards contrivance. Markets operate by looking for the best price available to maximise profits. It would be unusual for the market to support very long chains where each participating business is making a profit without adding any apparent value. Each business in such a chain is adding to the broker’s costs.
No end user in the ‘wholesale market’ chains
A typical transaction for goods involves a manufacturer, an authorised distributor, a retailer and/or an end customer in the transaction chain. For services it would be, likewise, be short, with often a direct relationship existing between the service provider and the customer. This is something we would normally expect to see even where the goods flow through the wholesale market. If we have not been able to identify any of these parties this must cast doubt over their commerciality, leading to an inference that the transactions were artificially contrived for the purposes of VAT fraud.
HMRC are aware of a large number of traders involved in VAT fraud that use offshore banks / branches, particularly for UK to UK transactions. Use of such banks raise concerns that the traders may be trying to circumvent the stringent anti money laundering controls that exist within the UK regulated sector.