Fulfilment Businesses: Register with HMRC by 30 June 2018 to Avoid Penalties

What are the new Fulfilment House Due Diligence Scheme (FHDDS) requirements?

If you are a business storing goods in the UK for sellers established outside the EU, you may need to register for the Fulfilment House Due Diligence Scheme (FHDDS) by 30 June 2018. FHDDS is part of a package of measures intended to disrupt and deter abuse by overseas businesses selling goods to UK customers through an online marketplace and make it more difficult for non-compliant businesses to trade in the UK. It will assist HMRC in identifying and tackling non-compliance and ensure a level playing field for compliant businesses in the UK.  HMRC intend to publish a register of compliant fulfilment businesses.

Businesses that must register

You must register if you store goods where all of the following apply:
– The goods were imported from outside the EU.
– The goods are owned by, or stored on behalf of, someone established outside the EU.
– The goods are offered for sale and have not been sold in the UK before.

But you do not need to apply if:
– You own the stored goods.
– Your main business is transporting goods and you need to store the goods temporarily as part of the transport service.

When to register

You can apply online from 1 April 2018 and must submit applications using the FHDDS online service by 30 June 2018.  You must have a Government Gateway user ID and password and can apply after logging in.

Late applications may incur a penalty of up to £3,000.  If you do not register by 1 April 2019, you will not be allowed to trade as a fulfilment business and risk a £10,000 penalty and criminal conviction.

Once registered

You have an obligation to:
– Hold the names and contact details of overseas customers
– Hold and verify the VAT registration and VAT exemption reference numbers (if applicable) of overseas customers
– Keep a record of the type and quantity of goods stored
– Keep a record of import entry numbers
– Keep a record of the country where the goods are delivered
– Give notices to overseas customers explaining UK tax and duty obligations

Non-retention of records also carries a penalty of £500.

If you suspect that your customer has not met any of its VAT or customs duty obligations, you must work with them to ensure future compliance, notify HMRC and cease work with them until they start to comply.  Again, penalties of up to £3,000 will apply if you do not comply with these obligations.

Given the fast approaching and strict deadline, fulfilment businesses should be looking to apply to register as soon as possible.  As you can see, FHDDS will potentially result in a significant additional administrative burden for businesses in this sector.  Penalties can be severe and there is the added risk of criminal proceedings.  In order to reduce the burden and risk, businesses falling within FHDDS need to have robust systems in place to ensure that they are compliant.  We would be happy to assist with reviewing processes and procedures prior to any application being made and also guide you through the application process in order to minimise questions from HMRC following submission.

Please contact us should you require further information on FHDDS or assistance with registration. Sean Turner is a Senior VAT Manager and can be contacted by email at or by phone on 0207 465 1908.

Find out more about Menzies VAT advisory services.

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