Fulfilment House Due Diligence Scheme

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HMRC Fulfilment House Due Diligence Scheme

Fulfilment houses are third party services that take care of fulfilling client orders on the business owner’s behalf. Fulfilment houses take charge of receiving the products from the supplier, housing the inventory, receiving the orders from the business owner’s clients, and packaging and shipping said orders to the business owner’s clients. HMRC estimates that overseas traders selling goods online to UK customers are costing the exchequer £1-1.5 billion of VAT a year. HMRC intend to combat this abuse by introducing a new Fulfilment House Due Diligence Scheme which will open in 2018. Currently many goods are misdeclared and undervalued as they are imported from outside the EU. This is followed by the onward sale of the goods to customers in the UK without the correct amount of VAT being paid.

An outline of the Fulfilment House Due Diligence Scheme Timelines

The scheme will require all existing Fulfilment House businesses to register with HMRC from 1st April 2018 – 30th June 2018. HMRC will have from 1st July 2018-31st March 2019 to verify all applications. Any new businesses must register within 45 days in advance of the date they wish to begin trading. An online register of approved fulfilment houses will be available from 1st April 2019.

All applications will undergo a Fit and Proper assessment

  • All applications will be assessed by HMRC and key personnel involved must not have previously been involved in revenue non-compliance or fraud and there must be no connections between the business and other known non-compliant or fraudulent businesses.
  • Key personnel must have no unspent criminal convictions.
  • The application must be accurate and no attempt to deceive has been made.
  • There have been non negligent or persistent failures to comply with any HMRC record keeping requirements.
  • The business has no outstanding HMRC unmanaged debts.
  • It is highly likely from experience of other similar schemes that full business plans, published accounts, profit and loss accounts and published accounts will also be required.

Record Keeping Requirements

Fulfilment houses currently should hold:

  • The name and address of the owner of the goods
  • The import entry number (in its full format, including date)
  • The VAT registration certificate of the owner of the goods
  • Delivery documentation for onward supply to customer

As part of the scheme HMRC will require mandatory evidenced checks on the following:

  • That customers names and addresses are legitimate
  • That each of its customers has provided a valid VAT registration number
  • The fulfilment house can identify what goods are stored in its warehouse (including quantities and descriptions) and the owner of those goods
  • For each of its overseas clients, the fulfilment house has issued a Notice prescribed by HMRC – setting out the obligations of the overseas client in registering and accounting for VAT and duty.

If your fulfilment house is not approved the business will not be allowed to trade.

Penalties for non-compliance

There will be both Criminal and Civil penalties as well as a range of other penalties that are still in consultation. Criminal penalties will apply to the person upon who the obligation to register applies. Additionally forfeiture of all goods from non-compliant or houses that are operating contrary to approval will take place. Owners of goods seized from non-compliant fulfilment houses will have to formally request via HMRC for restoration. However, any goods that are found to have underpaid tax or duty will be treated under the current powers.

De-registration and striking off

HMRC will notify businesses in writing if they intend to revoke an approval giving reasons. This decision will be able to be appealed.

Can Altion Law help with Fulfilment House Scheme preparation for applications or refusals?

Yes. Altion Law can review existing business processes and assist with the application process. The scheme is very similar in design to another scheme called the AWRS and we have extensive experience in this area. We would also urge businesses that have been refused any previous registrations or have failed the ‘fit and proper’ test to contact us at the earliest point. Altion Law will also offer an dry run service in 2018 where we will work through the likely scheme questions with your business in advance of the HMRC interview to insure you are aware and correctly prepared. Altion Law can also assist with appealing any fines or penalties applied under the scheme but again businesses only have limited time to lodge an appeal. Call one of our team for a free consultation on 01908 414990

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For a free enquiry, call us today on 01908 414990, email us at hello@altion-law.co.uk or complete our free enquiry request for a free, confidential and no obligation discussion and let one of our expert team discuss your situation and the options available to you.