Are you prepared for the forthcoming Fulfilment House Due Diligence Scheme?

12th February 2018

Are you prepared for the forthcoming Fulfilment House Due Diligence Scheme?

E-commerce supply chain specialists Gotelee Solicitors continue to lead the way in advising on the forthcoming Fulfilment House Due Diligence Scheme (FHDDS). The introduction of this regulatory regime will mark a sea change in the way those providing fulfilment services run their businesses.

Who will FHDDS apply to?

FHDDS will apply to those who:

  • Store goods received from outside the EU, where the owner of the goods is not established in an EU Member State,

or,

  • Store such goods on behalf of a business or person who is not established in a Member State,

at a time when,

  • The goods are being offered for sale in the UK or elsewhere, and
  • There has yet to be a supply of the goods in the UK.

If a business or individual wishes to provide this type of fulfilment service from 1 April 2019 onwards, it will have to be registered with HMRC. It will be a criminal offence to provide such a fulfilment service whilst unregistered, punishable with a maximum penalty of up to 7 years imprisonment or an unlimited fine, or both. Goods stored in an unregistered Fulfilment House will be liable to seizure by HMRC and forfeiture.

For those who currently provide such a fulfilment service, an application to register will need to be submitted to HMRC between 1 April 2018 to 30 June 2018. Applications for registration by new fulfilment service providers, which commence trading between 1 April and 30 June 2018, will have to be submitted by 30 September 2018.

HMRC will then assess whether the business or key persons involved in the business meet its ‘fit and proper standard’ test.

For those whose applications to register are approved, the due diligence obligations will have to be complied with from 1 April 2019 onwards. These obligations will include:

  1. A requirement to notify HMRC if it is known, or where there are reasonable grounds to suspect, that the customer (whether that’s the owner of the goods or a person/business on whose behalf the goods are stored) has not met their VAT or customs duty obligations.
  2. A requirement to cease doing business with the customer, if directed to do so by HMRC.
  3. Issue each customer with an HMRC Information Notice, containing, amongst other things, details regarding the customer’s VAT and customs duty obligations.
  4. Maintain a record for 6 years of the following information:
    • Name and contact details of each customer.
    • VAT registration number of each customer.
    • The type and quantity of the goods stored for each customer.
    • The import entry number(s) of the goods stored for each customer.
    • The address to which such goods are delivered from storage.
    • A copy of the Information Notice required sent to each customer.

HMRC will impose financial penalties if any of these due diligence obligations are breached and may then conclude that the fulfilment service provider should be struck off the FHDDS register if it no longer meets the ‘fit and proper standard’ test.

How can Gotelee help?

For advice and assistance on FHDDS contact Howard Catherall at howard.catherall@gotelee.co.uk or Hugh Rowland at hugh.rowland@gotelee.co.uk, or call 01473 298167. Alternatively, come and see us at our stand in the UK Warehousing Association pavilion at Multimodal between 1 and 3 May 2018.

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