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Fulfilment Businesses

In the 2016 Budget 2016, the government announced the introduction of the Fulfilment House Due Diligence Scheme from 2018 as part of a package of measures designed to combat growing abuse in trading in goods via online marketplaces.

The abuse is enabled by misdeclaration and undervaluation of goods imported from outside the EU, and sometimes the abuse of reliefs that are designed to facilitate trade. This is followed by the onward sale of the goods to customers in the UK taking place without the correct amounts of UK VAT being paid.

The Government considers that the abuse is a growing problem which affects competition and is unfair to legitimate and compliant UK businesses. It also has a significant impact on VAT receipts. The requirement for fulfilment houses to be registered and to carry out due diligence and record keeping is part of the solution adopted by the Government. Many overseas suppliers which sell to UK customers online make use of UK based fulfilment houses to store, pack and/or deliver their online orders in order to compete on speed with UK businesses. The due diligence scheme is designed tol make it more difficult for non-compliant suppliers to trade in the UK and will enable HMRC to identify and tackle them more easily.

As a result of this policy, section 49(1) of the Finance (No 2) Act 2017 provides that a person may not carry on a third country goods fulfilment business otherwise than in accordance with an approval given by the Commissioners for Her Majesty’s Revenue and Customs (the Commissioners). •

A person carries on a third country goods fulfilment business if they
if the person, by way of business:

* stores third country goods which are owned by a person who is not established in a Member State, or stores third country goods on behalf of a person who is not established in a Member State, at a time when two specified conditions are met in relation to the goods;


* 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.

Goods are “third country” goods if they have been imported from a place outside the Member States within the meaning of section 15 of the Value Added Tax Act 994.

A person is not treated as carrying on a third country goods fulfilment business if their activities are incidental to the carriage of the goods.

See Further: HMRC consultation outcome : Fulfillment House Due Diligence Scheme

[Page created: 24/03/2018]


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