Fulfilment houses required to register with new VAT scheme

Businesses which store goods imported from outside the EU will need to register for a new scheme designed to combat the abuse of VAT rules.

The new system, known as The Fulfilment House Due Diligence Scheme (FHDDS), is part of a package of measures that will “disrupt and deter abuse by some overseas businesses selling goods to UK customers through online marketplaces”.

It was first announced at Budget 2016, following reports that non-EU traders on online platforms such as eBay could undercut UK businesses by not charging VAT on consumer goods.

Fulfilment houses will need to register for the new scheme by 30 June 2018. Businesses that start trading on or after 1 April to 30 June 2018 will need to apply on or before 30 September 2018.

The Government warned that there are penalties for late applications. Businesses caught trading without FHDDS clearance risk fines of up to £10,000 and a criminal conviction.

Financial Secretary to the Treasury, Mel Stride, said: “Whilst the honest majority pay what they owe, some businesses that sell goods online to UK shoppers are failing to pay the correct amount of VAT.

“This behaviour unfairly undercuts businesses trading in the UK that play by the rules, abuses the trust of buyers, and deprives the government of significant revenue that funds vital public services.

“We are clear that everyone must pay their fair share of tax, and tackling tax evasion in all its forms is a top priority for the Government.”

The Government suggests that the measures will help protect around £1 billion of tax revenue by 2023, while also levelling the playing field between EU and non-EU traders.