Fulfilment House Due Diligence Scheme

The new Fulfilment House Due Diligence Scheme will open for online applications on 1 April 2018. From that date, businesses in the UK that store any goods imported from outside the European Union (EU) owned by, or on behalf of, someone established outside the EU, will need to apply for HMRC approval if those goods are offered for sale. The deadline for applications from existing businesses falling within the scope of the scheme is 30 June 2018, and there are penalties for late applications. For businesses that commence trading on or after 1 April 2018, the application deadline date is 30 September 2018.

Businesses that only store or fulfil goods that they own, or only store or fulfil goods that are not imported from outside the EU, are not required to register.

Registered businesses must carry out certain checks and keep certain records from 1 April 2019. Businesses covered by the scheme will not be allowed to trade as a Fulfilment Business from this date if they do not have approval from HMRC. Those that do, risk a £10,000 penalty and a criminal conviction.

From 1 April 2019, registered businesses will be required to keep a record of:

– overseas customers’ names and contact details;
– overseas customers’ VAT registration numbers;
– the type and quantities of goods stored in the warehouse;
– import entry numbers;
– the delivery addresses; and
– notices that the business will need to give its overseas customers, which explain their tax and duty obligations in the UK.

Records must be kept for six years – a penalty of £500 may be imposed for failure to comply with this requirement.

Each registered business must verify all their overseas customers’ VAT registration numbers.

If they suspect their overseas customer hasn’t met any of its VAT or customs duty obligations, the registered business:

• should work with them to help make sure they do in the future
• must notify HMRC
• must stop working with them if HMRC sends the registered business a notice

There are penalties of between £500 and £3,000 if these checks are not made.

Early preparation in this area is recommended to ensure that the application for approval is made on time, and that systems are in place to gather and maintain the necessary records. HMRC can charge a penalty of £500 for a late application. This could increase by £500 each month the application is late, up to a maximum of £3000.

Further information can be found on the GOV.UK webpage: Fulfilment House Due Diligence Scheme.