09 04 2018

UK Launches VAT Due Diligence Scheme For Fulfillment Firms

The UK Government has opened registration for its Fulfilment House Due Diligence Scheme (FHDDS), which is intended to ensure that fulfillment houses report VAT by online traders based outside the EU.

Those obligated to register include businesses that store goods imported from outside the EU that are owned by, or on behalf of, someone established outside the EU. Approved fulfillment businesses must complete due diligence checks on their overseas customers and maintain records about the goods they store from April 1, 2019.

Businesses that only store or fulfill goods that they own, or only store or fulfill goods that are not imported from outside the EU, are not required to register. Transport businesses that need to store goods temporarily as part of their service, such as during an overnight break, are also not required to register.

Businesses that meet the FHDDS criteria will not be allowed to trade as a fulfillment business from April 1, 2019, unless they are approved by HMRC, and risk a GBP10,000 (USD14,000) penalty and a criminal conviction if they do so. The deadline for applications from existing fulfillment businesses is June 30, 2018. Businesses that start trading on or after April 1, 2018, to June 30, 2018, will need to apply on or before September 30, 2018, with penalties in place for late applications.

The scheme was announced by the Government at Budget 2016 as part of a package of measures to disrupt and deter abuse by some overseas businesses selling goods to UK customers through online marketplaces.