Establishing whether the JSL measure should be applied: Establishing whether the taxable person 'knew or had reasonable grounds for knowing': Indicators that should have alerted the taxable person
In respect of the transactions for which JSL is being considered, what indicators should have alerted the taxable person to the risk that VAT would go unpaid?
- Specific notification from HMRC to the taxable person that previous deals involving that supplier had been traced to a VAT loss and/or had involved carousel movements of goods.
- Notification to the taxable person that HMRC date stamps have been present on goods offered for sale by that supplier, or that there is evidence of HMRC date stamps being removed from packaging. This would strongly suggest that the goods had been subject to carousel movement, which should alert the trader to a significant risk that transactions entered into with that supplier may be connected with the non-payment of VAT.
- Notification to the taxable person from HMRC that other MTIC characteristics, such as third party payments, have occurred in transaction chains involving that supplier.
- Deals with that supplier involve consistent or pre-determined profit margins, irrespective of the date, quantities or specifications of the specified goods traded.
- Buyer and seller contact the taxable person within a short space of time with offers to buy/sell goods of same specifications and quantity, or supplier refers your taxable person to a customer who is willing to buy goods of the same quantity and specifications being offered by the supplier.
- Supplier offers deals that carry no commercial risk for your taxable person - e.g. no requirement to pay for goods until payment received from customer.
Nature of specified goods traded - e.g.
- goods for which trading in the quantities concerned does not appear credible
- goods have UK specifications, yet are being exported
(NB Any assertions of lack of credibility will need to be supported by evidence, such as reference to manufacturers’ information or market data.)
- High value deals offered with no formal contractual arrangements.
- High value deals offered by a newly established supplier with minimal trading history and/or low credit rating.
- A brand new business can obtain specified goods cheaper than a long established one.
- Taxable person’s supplier is unwilling to provide International Mobile Equipment Identity (IMEI) or other serial numbers.
- Taxable person’s supplier requires 3rd party payments to be made or payments to an offshore bank account.
- Taxable person sells goods that he knows have only recently arrived in the UK from the EU.
Further indicators can be found in section VATF60000 of the VAT Fraud guidance manual.