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definition is key but may be misleading. The customer may be a VAT-registered business in the UK and may have a UK address. Still, the fact that a business has a UK VAT registration number does not automatically make it an established taxable operator. UK VAT establishment definition (VAT Notice 700/1) reads: A UK establishment exists if either:


• The place where essential management decisions are made and the business’s central administration is carried out is in the UK,


• The business has a permanent physical presence with the human and technical resources to make or receive taxable supplies in the UK.


Although currently there is no easy way to determine whether a


business is established or not, HM Revenue & Customs (HMRC) would normally consider a company that is incorporated in the UK to have an establishment here as long as it is able to receive business supplies at its registered office. Offer of sale: The scheme applies to stored goods which have not been sold to the end-user at the point of import, but are offered for sale in the UK while in storage. This would usually apply to goods offered for sale on e-commerce marketplaces.


Due diligence Registration is only the first step. Once registered, the fulfilment house is required to give all its customers information relating to their VAT and customs duty obligations arising in relation to trade in third-country goods, in an effort to reduce non-compliance and


April 2018


eradicate bad practices and tax fraud. Fulfilment businesses are therefore required to implement a


number of measures referred to as ‘due diligence’. At the time of writing, the secondary legislation specifying the elements of fulfilment house due diligence to be incorporated into procedures does not differ significantly from what a diligent trader would apply to any of its customers. There are, however, certain elements of the FHDDS that are


new and may be viewed as potentially onerous and possibly requiring changes to the logistical/warehouse IT systems employed by fulfilment house operators. One of these measures, which is currently unusual, will be for fulfilment houses to record and store data relating to import customs declarations. This may be required under the new legislation. Under the due diligence, traders are also expected to check whether their customers have met their VAT obligations in the past, which may create a number of challenges, especially in relation to newly established businesses.


Conclusion The world of commerce is constantly changing and presents new challenges to the trade and the authorities. The new legislation may not be the answer to all the problems linked to tax evasion, but it hints at a more due diligence-based approach expected of freight forwarders and warehouse operators in future. As mentioned earlier, the secondary legislation has not been finalised at the time of writing, but we would like to hear from the Members when FHDDS becomes part of their daily operations.


The new legislation ... hints at a more due diligence- based approach expected of freight forwarders and warehouse operators in future.


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