UK import VAT fulfilment house £1.5bn scheme
From 30 June 2018, all UK fulfilment houses providing imported goods storage for non-EU businesses will need to apply to join a new, approved register. The scheme is designed to tackle import VAT and customs fraud, estimated to cost the UK between £1.0 and £1.5 billion per annum. The plan was originally announced in the 2016 Budget.
The UK government has already made online market places potentially liable for VAT fraud committed by non-EU e-commerce sellers on their website.
Who must apply to join the fulfilment house register?
The scheme affects all UK-based businesses that fulfil orders of imported goods for third parties. Some rules may also apply to businesses that import goods or those that transport imported goods to and from fulfilment houses.
Businesses need to be registered if they store any goods that are:
- Imported from a country outside the EU
- Owned by, or stored on behalf of, someone established outside the EU
- Offered for sale and haven’t been sold in the UK before
- If the goods above are held for longer than 24 hours
Once an application to join the scheme is received, HMRC will perform background checks on the company, its directors and associates. If there are records of revenue non-compliance, fraud or other criminal convictions.
Due diligence requirements on non-EU customers
Once registered, fulfilment houses will be required to keep records for at least 6 years and verify foreign customers’:
- Names and contact details
- VAT registration numbers
- The type and quantities of goods stored in their warehouse
- Import entry numbers
- The delivery addresses
In addition, fulfilment houses must supply notices to customers which explain their tax and duty obligations in the UK.
Customers breaking VAT or customs rules
Where a fulfilment house suspects a customer has not met its VAT or customs duty obligations, it must take the following actions:
- 1. Detail their obligations to them
- 2. Notify HMRC
- 3. Cancel the service if instructed by HMRC
The penalties for not following these requirements range from £500 to £3,000.
Fines for non-compliance
A late application incurs a fee of £500, which rises by £500 per month to a maximum of £3,000. After April 2019, there is a risk of a £10,000 fine and loss of rights to trade as a fulfilment house. The fine for not keeping checks up-to-date is between £500 and £3,000.
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