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UK Issues Guidance On Fulfilment Business Scheme

by Jason Gorringe,, London

17 November 2017

HM Revenue and Customs has launched guidance into a new due diligence scheme, the Fulfilment House Due Diligence Scheme, which aims to ensure that overseas traders comply with value-added tax (VAT) regulations.

The scheme targets businesses that store any goods imported from outside the EU for or on behalf of someone outside the EU.

It provides that a business seeking to carry on third-country goods fulfillment business must first notify and gain approvals from HMRC. A business must then notify HMRC if they know or have reasonable grounds to suspect that a third country customer has not met a VAT or customs duty obligation in relation to third-country goods stored by the approved person. It also restricts an approved person from carrying on a third country goods fulfillment business with a person named in a notice issued by the Commissioners.

The regime also provides that an approved person must give notice to all third-country customers about the scheme and makes further provision about what that notice must state. Among other things, it includes certain due diligence and record-keeping obligations, including that the business must verify a third-country customer's VAT registration number.

Following a public consultation in summer 2016, the Fulfilment Businesses (Approval Scheme) Regulations 2018 has been opened up for consultation, and primary legislation in the Finance (No 2) Bill 2017 has been tabled in Parliament.

Those trading as a fulfillment business before April 1, 2018, will need to apply on or before June 30, 2018, and those trading after April 1, 2018, will need to apply on or before September 30, 2018.

The guidance sets out that a business, once approved, will be put on a register; must keep certain records; must carry out checks on their overseas customers and of the goods they store; and will be charged penalties if they fail to apply and register at the right time.

The guidance explains what activities are covered by the scheme; how HMRC will undertake due diligence of businesses; and the penalties for non-compliance.

Covered businesses must keep a record of:

  • their overseas customers' names and contact details
  • their overseas customers' VAT registration numbers
  • the type and quantities of goods stored in their warehouse
  • import entry numbers
  • the delivery addresses
  • notices that must be furnished to overseas customers, which explain their tax and duty obligations in the UK.

Records must be retained for six years, with a GBP500 (USD660) penalty for non-compliance.

TAGS: compliance | Finance | tax | business | value added tax (VAT) | United Kingdom | legislation | regulation | penalties | trade | Regulations

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