Value added tax

Tribunals should not unduly focus on the question whether a taxpayer had acted with due diligence. Even if a taxpayer had asked appropriate questions, he was not entitled to ignore the circumstances in which his transactions took place if the only reasonable explanation for them was that his transactions had been or would be connected to fraud.

The danger in focusing on the question of due diligence was that it might deflect a tribunal from asking the essential question whether or not the trader should have known that by his purchase he was taking part in a transaction connected with fraudulent evasion of VAT. The circumstances might well establish that he was.