The Fulfilment House Due Diligence Scheme ensures that fulfilment houses play their part in reducing abuse of VAT rules by online traders based outside the EU.

If you are already outsourcing or considering outsourcing your fulfilment operations, then ask yourself this;

Is the Fulfilment house you’re using or thinking of using legally accredited by H.M.R.C. to do so?

3P Logistics (3PL) were one of the first Fulfilment companies in the UK to be awarded such status and become due diligence scheme registered.

Any company that stores goods in the UK for sellers established outside the EU, may need to apply for the Fulfilment House Due Diligence Scheme.

If approved by H.M.R.C.

  • Centre’s are placed on a register
  • Centre’s must maintain and retain specific records
  • Centre’s must carry out checks on their overseas based clients and the goods they store

Centre’s will be charged penalties for non-compliance.

Businesses that must be registered

Centre’s need to be registered if their business stores any goods where all of the following apply:

  • the goods were imported from a country outside the EU
  • the goods are owned by, or stored on behalf of, someone established outside the EU
  • the goods are being offered for sale and have not been sold in the UK before

Businesses that are registered with HMRC for other schemes that require due diligence on clients must also register for this scheme if they meet these criteria.

If your application is late, HMRC can charge the warehouse keeper a penalty of up to £500. This could increase by up to £500 each month their application is late, up to a maximum of £3,000.

If businesses are covered by this scheme they must be registered before 1 April 2019. It is illegal to operate outside of the scheme and any fulfilment company found doing so

  • will not be allowed to trade as a fulfilment business
  • risk a £10,000 penalty and a criminal conviction.

When Centre’s are registered

From 1 April 2019, they must keep a record of:

  • their overseas customers’ names and contact details
  • their overseas customers’ VAT registration numbers or their VAT exemption reference numbers
  • the type and quantities of goods stored in their warehouse
  • import entry numbers
  • the country where the goods are delivered
  • notices that they will need to give their overseas customers, which explain their tax and duty obligations in the UK

Centre’s must keep these records for 6 years. They can be charged a penalty of up to £500 if they do not keep these records.

What Centre’s must check

Centre’s must check all their overseas customers’ VAT registration numbers.

If their overseas customer is not required to be VAT registered, you should check their HMRC VAT exemption reference number.

HMRC will give more information on how to check these before 1 April 2019.

If Centre’s suspect an overseas customer has not met any of its VAT or customs duty obligations, they:

  • should work with them to help make sure they do so in future
  • must notify HMRC
  • must stop working with them if they are unwilling to comply with their obligations

Summary

The fulfilment house due diligence scheme is LAW. Avoidance of such compliance will leave both the fulfilment provider and its clientele extremely vulnerable to prosecution and business disruption.

3P Logistics (3PL) are authorised services providers under the scheme and in doing so we provide that added peace of mind to all sellers who outsource their fulfilment and logistics to us.

Barry Ryan

Barry Ryan

Barry Ryan is Marketing Manager at 3PL. He researches and writes everything you need to know about eCommerce fulfilment and logistics.

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