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Policy & Compliance


www.bifa.org


Are you ready for FHDDS?


Following concerns raised by BIFA, the Fulfilment House Due Diligence Scheme (FHDDS) becomes operational from 1 April 2018 with a tighter definition of who it applies to. So who does it apply to now, and what do they need to be aware of?


Introduction The implementation of the much discussed and the long- anticipated Fulfilment House Due Diligence Scheme (FHDDS) commenced on 1 April 2018. Included in Finance (No. 2) Act 2017, the scheme is trying to


address one of many issues related to tax evasion, particularly in the e-commerce environment – primarily unpaid VAT on online sales to the end user. At the time of writing, BIFA had been assured that the online


registration system would be available from 1 April 2018. Businesses trading as a fulfilment business before 1 April 2018 will need to apply on or before 30 June 2018. Businesses that start trading on or after 1 April 2018 will need to apply on or before 30 September 2018. It is important that Members do not ignore the requirement for


registration as penalties will be charged if they do not apply to register on time.


Background The original provisions for the FHDDS were first announced in 2016. The definition of a fulfilment business in the original consultation document had been too wide, including virtually all storage, warehouse and handling activities. This would have meant many forwarders being regarded as a


fulfilment house and thus within the scope of the scheme. Following numerous discussions and using feedback from our


Members, BIFA brought the comments and concerns expressed by the trade forward to the authorities. That resulted in the definition of a fulfilment house being amended and BIFA notes that the definition used in the final version of the legislation is more specific, trying to focus only on those businesses whose modus operandi meets a set of well-defined criteria.


Who needs to register? Clause 48 of the Finance Act builds the framework for FHDDS specifying the criteria that distinguish fulfilment businesses from the rest of the crowd. (1) For the purposes of this part, a person carries on a third-


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country goods fulfilment business if the person, by way of business: (a) Stores third-country goods that are owned by a person who is not established in a member state, or (b) Stores third-country goods on behalf of a person who is not established in a member state, at a time when the conditions in subsection (2) are met in relation to the goods.


(2) The conditions are that: (a) There has been no supply of the goods in the UK for the purposes of VAT Act 1994, and (b) The goods are being offered for sale in the UK or elsewhere.


In order to simplify the legal definition, traders have three


questions to ask themselves about the contract and the goods they store for their customers: • Are the stored goods in your warehouse imported from a country outside the EU?


• Are the goods owned by, or stored on behalf of, someone established outside the EU?


• Are the goods being offered for sale and have not been sold in the UK before? If the answer is ‘Yes’ to these three questions, then Members


probably need to consider themselves within the scope of the FHDDS legislation and need to register.


What does it mean in practice? The three fundamental points to be determined to establish whether or not a Member is acting as a fulfilment house when storing goods on behalf of another party are: The goods: Have they been imported from outside the EU and are they in free circulation with duties and import VAT paid? It is important to distinguish between the previously mentioned category of goods and goods stored in a customs warehouse or a temporary storage facility, as these are not included in the definition. The owner: It needs to be ascertained whether the owner of the goods, or the person on whose behalf the goods are stored, is or is not established in the EU. The ‘established’ element of the


April 2018


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