VAT Fraud & Supply Chain Due Diligence

VAT fraud can expose businesses to significant financial, regulatory and reputational risk. HM Revenue & Customs expects businesses to take reasonable and proportionate steps to understand who they are trading with, how transactions are structured and whether supply chains present indicators of tax fraud or other forms of financial crime.

This page brings together official HMRC and GOV.UK resources relating to VAT fraud prevention, supply-chain due diligence, business verification, transaction risk assessment and the records businesses should retain to demonstrate reasonable care.

EDDC01020 – what is due diligence?
EDDC02040 – HMRC due diligence expectations
VATF72000 – due diligence and risk assessment
VATF73000 – HMRC guidance on due diligence
VATF74000 – acting on due diligence results
How to spot missing trader VAT fraud
Missing Trader Fraud 2020 PDF
VAT Notice 726 – joint and several liability
CC/FS42 – penalties for transactions connected with VAT fraud
People involved in transactions connected with VAT fraud
Check a UK VAT number
Check an EORI number
Companies House search
The UK Sanctions List
Why VAT Fraud & Supply Chain Due Diligence Matters

EDDC01020 – what is due diligence

This guidance explains the meaning of due diligence and the role it plays in helping businesses identify and manage commercial risks. It outlines the checks and enquiries that HMRC expects businesses to undertake when assessing suppliers, customers and transactions.

EDDC02040 – HMRC due diligence expectations

HMRC’s due diligence expectations focus on maintaining proportionate, risk-based procedures that help businesses identify unusual trading patterns and potential fraud risks. The guidance explains the practical steps businesses should take to demonstrate reasonable care.

VATF72000 – due diligence and risk assessment

VATF72000 explains how risk assessments can help businesses identify transactions that may be connected with VAT fraud. It highlights the importance of documenting checks and maintaining evidence that supports commercial decision-making.

VATF73000 – HMRC guidance on due diligence

This section of the VAT Fraud Manual provides detailed guidance on the due diligence measures HMRC considers when reviewing a business’s involvement in supply chains. It focuses on evidential standards and ongoing monitoring of commercial relationships.

VATF74000 – acting on due diligence results

Carrying out checks is only part of the due diligence process. VATF74000 explains the importance of reviewing the results obtained and taking appropriate action where concerns, inconsistencies or warning signs are identified.

How to spot missing trader VAT fraud

Missing trader fraud can cause significant losses to the Exchequer and serious consequences for businesses involved in affected supply chains. This guidance outlines common warning signs and practical steps businesses can take to reduce exposure to VAT fraud risks.

Missing Trader Fraud 2020 PDF

This publication provides additional background information on missing trader fraud, how supply chains can be exploited and the indicators businesses should consider when assessing commercial risks.

VAT Notice 726 – joint and several liability

VAT Notice 726 explains circumstances where businesses may become jointly and severally liable for unpaid VAT arising elsewhere within a supply chain. Understanding these provisions is an important part of any VAT fraud risk assessment process.

CC/FS42 – penalties for transactions connected with VAT fraud

CC/FS42 explains the penalties that may apply where businesses participate in transactions connected with VAT fraud. The factsheet outlines HMRC’s approach to penalties and the factors considered when determining liability.

People involved in transactions connected with VAT fraud

HMRC publishes information about businesses and individuals who have been involved in transactions connected with VAT fraud. Reviewing this information can form part of a wider due diligence process when assessing trading relationships.

Check a UK VAT number

Verifying a VAT registration number can help confirm that a business is properly registered for VAT and that the information provided by a supplier or customer is accurate and current.

Check an EORI number

An Economic Operators Registration and Identification (EORI) number is required for certain import and export activities. Verification checks can help businesses confirm trading credentials and customs-related information.

Companies House search

Companies House records provide access to company registration details, filing histories, director information and other public records that may assist with supplier and customer due diligence.

The UK Sanctions List

Sanctions screening forms an important part of risk management and compliance procedures. The UK Sanctions List allows businesses to check whether individuals, organisations or entities are subject to UK financial sanctions.

Why VAT Fraud & Supply Chain Due Diligence Matters

Due diligence is an important part of responsible business compliance. HMRC expects businesses to take reasonable care when entering into trading relationships and to assess whether transactions present any indicators of tax fraud, supply-chain risk or other forms of financial misconduct.

A business should understand who it is dealing with, how goods or services move through the supply chain, whether transactions make commercial sense and whether appropriate evidence exists to support the transaction. Due diligence is not a one-off exercise. It should be reviewed and updated where trading patterns change, transaction values increase or new risks emerge.

Maintaining clear records of supplier checks, customer verification, contracts, invoices, payments and goods-movement evidence can help demonstrate reasonable care and support a business if HMRC later raises questions about a transaction or supply chain.

For practical guidance on carrying out supplier and customer checks, businesses should also review the Supplier & Customer VAT Fraud Risk Checks guide.