The Fulfilment House Due Diligence Scheme – the new weapon in the war on tax avoidance. You may not even realise your Logistics and Warehousing business is at risk.
A government-commissioned report identifies an estimated £1.5 billion black hole in the tax system due to, it says, goods sold through online platforms. Businesses based on the Amazon/Ebay model use online platforms to sell goods imported from outside the EU. They are stored here prior to being delivered. Often the goods are stored in warehouses operated by third party logistics providers who pick, pack and despatch the goods. These are fulfilment houses.
HMRC has trained its sights on such third party providers. New legislation will ensure that they can be held to account for under-declaration of due duty. HMRC says under declaration is symptomatic of the e-commerce retail system, where savings of a few pence can mean the difference between success and failure in a crowded online marketplace. UK based retailers find it hard to compete with the prices on offer from virtual storefronts who often sell without paying VAT or import duty. So tackling this issue is welcome news for UK retailers.
HMRC cannot focus its resources outside of the EU(principally in China) where the vast majority of consumer goods come from. Instead, those who facilitate the supply and distribution will be held to account. If your business provides a fulfilment service or stores goods from outside the EU on behalf of others, you may need to rethink your entire business model.
Warehousing and logistics providers who operate a fulfilment house business will be required by law to apply to register. They will need to prove they are “fit and proper”; demonstrate they can identify the origins of their clients; and identify a VAT representative. They will need to carry out due diligence checks on the suppliers involved and ensure that the goods match up with the import paperwork. Failure to comply can result in civil and criminal penalties, including up to 7 years of imprisonment.
How can our solicitors help you with this new legislation?
The clock is ticking. Registration for the scheme must be completed prior to D-Day in April 2019. For information on how this scheme will affect your business and how you can prepare for what is coming, talk to our team of experts in the logistics field.
“There is a sea change coming for all businesses operating in e-commerce fulfilment. Ignoring the effect of this new scheme is not an option for any business that wants to trade within the law”, says Howard Catherall at Gotelee Solicitors with offices in Ipswich, Felixstowe, Hadleigh, and Woodbridge. If you would like to speak to Howard about the scheme and how we can help then call him on 01473 298190 or email [email protected]