Some businesses which operate fulfilment services need to be aware of their new obligation to register for the Fulfilment House Due Diligence Scheme (FHDDS) from 31 December 2020.
The reason for this, of course, is Brexit.
Before the Brexit deadline, businesses which carried on a “third country fulfilment business” had to be registered with HMRC under the FHDDS and adhere to the requirements of that scheme in order to remain registered. A “third country fulfilment business” was one that:
• stored goods imported from outside of the EU, which were owned by a person who was not established in a Member State, or on behalf of a person who was not established in a Member State; and
• there had been no supply of the goods in the United Kingdom for the purposes of VATA 1994; and
• the goods were being offered for sale in the United Kingdom or elsewhere;
Or, to put it simply, any business which stored non-EU goods that were unsold at the time of receipt at their warehouse.
The Finance (No 2) Act 2017, which provides the statutory framework for the FHDDS, was amended by the Taxation (Cross-border Trade) Act 2018 c. 22 Sch.8(2) para.123(2)(b)(ii)) which came into force on 31 December 2020.
The effect of the amendment is that the requirements of the FHDDS now apply to any person carrying on an “imported goods fulfilment business”, and this includes any business which:
• stores goods imported into the United Kingdom which are owned by a person who is not UK-established, or on behalf of a person who is not UK-established; and
• there has been no supply of the goods in the United Kingdom for the purposes of VATA 1994; and
• the goods are being offered for sale in the United Kingdom or elsewhere;
Or, to put it simply again, any business which stores non-UK goods that are unsold at the time of receipt at their warehouse.
So, the requirements under the FHDDS now apply to goods imported from EU countries and owned by an EU business, in the same way they used to apply only to goods imported from outside of the EU. This means that registered fulfilment houses may need to adjust their record keeping to embrace storage of unsold goods from the EU.
If you are operating a fulfilment business storing unsold EU goods you may need to register with HMRC, under the FHDDS, as soon as possible and, in any event, before 30 June 2021. Failure to do so will incur financial penalties and may result in a criminal conviction. Non-UK goods stored in unregistered Fulfilment Houses may also be liable to seizure and forfeiture.
Once registered, an imported goods fulfilment business must comply with a number of due diligence obligations in order to avoid civil penalties for non-compliance and in order to remain on the FHDDS Register.
The obligations under the FHDDS remain largely unchanged, except that they now apply to “imported goods”, meaning goods imported into the UK. They previously only applied to “third country” goods, meaning goods which came from outside the EU.
The obligations under the FHDDS are currently as follows:
• To keep for six years records of:
• The names and contact details of overseas customers;
• The VAT registration or VAT exemption numbers of overseas customers;
• A description of the type and quantities of non-UK goods in storage;
• The import entry numbers of non-UK goods in storage;
• The country to which the goods are delivered from storage;
• The HMRC notices which must be given to overseas customers, which explain their tax and duty obligations in the UK;
• To check overseas customers’ details using their VAT registration number or VAT exemption number.
• To provide each overseas customer with a FHDDS Notice of Obligations, either:
• 30 days after approval under the FHDDS,
• 30 days after commencing trading with a new overseas customer,
• 30 days after the prescribed notices changes – HMRC will notify of any changes.
• To take action if there is knowledge or reasonable grounds to suspect that a customer has not complied with its tax or customs duty obligations, as set out in the above-mentioned notice. This includes:
• Informing HMRC of that knowledge or suspicion within 30 days;
• Stopping to provide a fulfilment service to that customer if it is still not meeting its obligations after 60 days;
• Not commencing providing a fulfilment service to a person or business where there is knowledge that, or reasonable grounds to suspect, it is not meeting its obligations.
If you need further advice on the operation of the scheme or in liaising with HMRC then contact Hugh Rowland or Joanne Henderson at Gotelee Solicitors LLP on 01473 211121.
Gotelee Solicitors LLP