What is FHDDS? A complete guide to the Fulfilment House Due Diligence Scheme

If you’re an overseas business storing goods in the UK, or you’re searching for a fulfilment partner to support your eCommerce operations, you may have come across the term FHDDS.

In this guide, we’ll explain what FHDDS is, who it applies to and why it matters when choosing a UK fulfilment partner.

What is FHDDS?

The Fulfilment House Due Diligence Scheme (FHDDS) was introduced by HMRC in 2018 to tackle VAT fraud committed by overseas businesses storing goods in the UK before selling them to UK consumers.

Prior to the scheme, some overseas sellers were importing products into the UK without correctly registering for or paying UK VAT. This created an unfair marketplace, placing compliant businesses at a commercial disadvantage.

FHDDS helps address this by requiring eligible fulfilment houses to register with HMRC and carry out due diligence checks on their overseas customers. Approved fulfilment businesses must maintain accurate records, verify customer information and demonstrate that they are taking reasonable steps to ensure overseas sellers are meeting their UK tax obligations.

While the legislation is aimed primarily at fulfilment businesses, it also provides reassurance for eCommerce brands looking for a trusted third-party logistics (3PL) partner. Working with an approved fulfilment house demonstrates that your provider operates to recognised compliance standards and follows HMRC’s due diligence requirements.

Who needs to register for FHDDS?

The scheme applies to UK 3PLs and fulfilment houses that store goods on behalf of overseas businesses before those goods are sold in the UK.

Generally, a 3PL or fulfilment house will need to register if it:

• Stores imported goods in the UK for overseas customers
• Picks, packs or dispatches those goods to UK consumers
• Meets HMRC’s definition of a fulfilment business

Businesses operating under the scheme must apply for approval from HMRC and continue to meet ongoing compliance requirements.

Not every warehouse, 3PL or fulfilment house falls within the scope of FHDDS, but for those that do, approval is a legal requirement rather than an optional accreditation.

What are the responsibilities of an approved fulfilment company?

Becoming an HMRC-approved fulfilment house involves more than completing an application.

Approved businesses must carry out ongoing due diligence to ensure overseas customers remain compliant throughout the partnership.

This includes:

• Verifying customer identities
• Maintaining accurate business records
• Checking VAT registration where applicable
• Keeping records of goods received, stored and dispatched
• Reporting relevant information to HMRC when required

These requirements help improve accountability throughout the supply chain while reducing opportunities for tax evasion.

Why is FHDDS important for overseas sellers?

Although overseas sellers are not responsible for registering a fulfilment house under the scheme, choosing an approved provider can offer significant benefits.

Working with an FHDDS-approved fulfilment partner demonstrates that your 3PL operates within HMRC’s compliance framework and carries out appropriate due diligence before onboarding new customers.

This provides reassurance that your fulfilment operation is supported by robust processes, helping minimise compliance risks while creating a stronger foundation for long-term growth in the UK market.

For businesses expanding internationally, selecting a fulfilment partner that understands UK regulatory requirements is an important part of building a resilient supply chain.

Case study: See why FHDDS was instrumental in European brand DOG Copenhagen’s decision to partner with 3PL for its UK fulfilment

Choosing a FHDDS-compliant 3PL

Compliance with FHDDS should be just one factor when selecting a fulfilment provider. Alongside regulatory requirements, you should also consider whether your fulfilment partner can support:

• Scalable warehousing as order volumes increase
• Fast and accurate order fulfilment
• Real-time inventory visibility
• Integration with eCommerce platforms, marketplaces and business applications
• Reliable UK and international shipping

A fulfilment provider should not only help your business remain compliant, but also support your future growth through efficient, flexible logistics solutions.

How important is FHDDS?

FHDDS is far more than a regulatory requirement – it’s an important indicator of operational integrity and compliance. For eCommerce businesses, choosing an FHDDS-approved fulfilment provider offers reassurance that your logistics partner is committed to meeting HMRC requirements and operating to recognised compliance standards.

At 3PL, we’re proud to have been one of the first fulfilment companies in the UK to become FHDDS-approved shortly after the scheme was introduced. By combining a strong compliance framework with efficient, scalable fulfilment solutions, we support ambitious eCommerce businesses as they grow, knowing their logistics operations are in safe and experienced hands.