ASPIRE ALERT! HMRC’s supply chain due diligence guidance has been revamped

• Government has finally updated its guidance entitled “Use of labour providers: advice on due diligence” which was last updated on 19 May 2017
• New guidance is now entitled “Advice on applying supply chain due diligence principles to assure your labour supply chains”
• Government has also published a document detailing “10 things about due diligence: supply chain assurance”
• The guidance sets out why performing due diligence is important in maintaining the integrity of the supply chain and the risks (including financial, legal, and reputational) of not performing “proper checks”
• Guidance specifically states that a business performing due diligence on its immediate customers and suppliers may not be sufficient and they may need to delve “below the surface”
• The guidance details the principles of “Check, Act and Review” which, if applied, will help businesses apply effective risk management and robust due diligence to assure the integrity of the supply chains
• As always, the guidance specifically states that it is not a “definitive checklist but are good practice examples”
• HMRC deem that due diligence checks should be “risk-based, relevant, reasonable, proportionate and most importantly, ongoing”
• The guidance also helpfully confirms that if we lose access to the Value Information Exchange System (“VIES”) which many businesses use to check that a supplier holds a valid VAT registration, a new site will be launched on Gov.uk to allow due diligence checks against UK VAT registrations although the guidance does state that businesses should verify the suppliers VAT registration details with HMRC before using them

Aspire Comment

The guidance has been entirely revamped although still retains phrases expected in HMRC guidance such as “this is not definitive checklist but are good practice examples” and “you must decide what checks are relevant, reasonable, and proportionate for your own business”. In general, the guidance does provide more detail than the previous guidance however from our experience HMRC Fraud Investigation Officers’ expect more checks to be done that what is detailed.

The guidance is far more “aggressive” this time round, but we consider this approach is correct on the basis that it demonstrates the risk which many have been ignoring for some time. The financial, legal, reputational, and potentially criminal risks which businesses are exposed to in using a labour supply chain are high. It is vital that you actively conduct due diligence your labour supply chain to maintain its integrity.

We have been publishing regular updates about supply chain due diligence and risk management for quite some time, some might say, obsessively. But the HMRC enquiries we have been involved in and this further guidance makes it clear that HMRC are committed to tackling fraud within labour supply chains and now is the time to ensure that you have a standard or a code which is what HMRC wants - “risk-based, relevant, reasonable, proportionate and most importantly ongoing”. Get in touch with us to discuss how we can help your business develop a Code of Conduct or due diligence approach which will adhere to the standards set out by HMRC.