Earlier this year we saw the Fulfilment Businesses Regulations introduced which will affect those involved in e-commerce distribution activities in the UK, with significant penalties for non-compliance. HMRC now have a new compliance team for non-EU businesses trading through fulfilment houses to ensure that companies are complying with these regulations.
HMRC believes that £1.5bn of VAT and Customs duty is not being paid in relation to large amounts of e-commerce taking place under the radar with fulfilment houses being used by retailers based outside the EU. These regulations are designed to clamp down on these activities.
Who needs to be registered?
If you store goods in the UK for sellers established outside the EU then you may need to be registered under these regulations for the Fulfilment House Due Diligence Scheme if the following criteria applies:
- Goods are imported from a country outside the EU
- Goods are owned by, or stored on behalf of, someone established outside the EU
- Goods are being offered for sale and have not been sold in the UK before.
What is the impact on your business?
Once registered you will be required to keep certain records and carry out checks on your overseas customers and the goods you store. You must verify all your overseas customers’ VAT registration numbers or if not registered their HMRC VAT exemption reference number. If you suspect your overseas customer has not met any of its VAT or customs duty obligations you will have a duty to report this and work with them to meet their obligations.
The new HMRC Compliance team
We have recently seen an increase in correspondence sent from the new HMRC team to non-EU businesses requesting information in support of submitted VAT returns and for comparison to data received from UK businesses registered under the new fulfilment house scheme, such as Amazon and eBay.
HMRC’s request for information comes with strict deadlines and we have so far seen assessments raised, suspension of online trading accounts and the threat of stock being destroyed which could have serious consequences for your business.
How can Menzies help?
If your business is covered by this scheme you must register before 1 April 2019 or you will not be allowed to trade as a fulfilment business and could risk a £10,000 penalty and a criminal conviction. If you have received a request for information, or think you should be registered under these regulations we can help with your obligations.