If your business is based outside the UK and you want to sell to UK customers from stock held in the UK, the warehouse you choose needs to be approved by HMRC under the Fulfilment House Due Diligence Scheme, known as FHDDS. This guide explains what the scheme is, which businesses it covers, and what to check before you send stock.
What is FHDDS?
FHDDS is an HMRC scheme for UK businesses that store goods on behalf of overseas sellers. It was introduced to reduce VAT evasion by overseas sellers holding stock in the UK. Businesses covered by the scheme must be approved by HMRC, and HMRC has published a list of approved businesses since April 2019.
Which warehouses need to be approved?
Under HMRC's guidance, a business must apply for approval if it stores goods that were imported from outside the UK, are owned by or stored on behalf of someone established outside the UK, and are being offered for sale without having been sold in the UK before. All three conditions apply together. The scheme also covers goods released from a customs regime into free circulation that the business continues to store for sale.
There are exceptions. A business that owns the goods it stores does not need approval, nor does a transport business that stores goods only temporarily, such as overnight, as part of moving them. Businesses storing goods in Northern Ireland for sellers established only in the EU and Great Britain are also outside the scheme.
Why it matters to overseas sellers
The duty to be approved sits with the fulfilment business rather than the seller, but the risk falls on both. Trading as a fulfilment business without approval is a criminal offence that can lead to a £10,000 penalty, and goods held by an unapproved business can be seized. If your UK warehouse is not approved, your stock is exposed.
How to check a fulfilment house is approved
Every approved business is given a unique reference number by HMRC. Ask your fulfilment provider for its number and check the business against HMRC's published list of approved fulfilment businesses on GOV.UK. An approved provider will give you its number without hesitation.
What an approved fulfilment house will ask you for
Approved businesses must check their overseas customers and keep records for six years. Expect to be asked for your VAT registration number, or VAT exemption number, which the fulfilment house checks with HMRC. You will also be asked for your business name and contact details, the type and quantity of goods you plan to store, and the import entry reference (MRN) for each shipment.
The fulfilment house also records where goods are delivered to once they leave storage, and gives you written notice of your UK tax and duty obligations. A provider that does not ask for these details may not be meeting the scheme's requirements.
Customs and VAT still apply
FHDDS does not replace customs clearance or VAT registration. Imported goods still need to be declared and cleared, usually by your freight forwarder or customs agent, before they are delivered to the warehouse. Whether and when your business needs to register for UK VAT depends on its circumstances, so take advice from a tax adviser before you start selling.
Storing your stock with TDW Logistics
TDW Logistics is an HMRC Approved Fulfilment Centre under the Fulfilment House Due Diligence Scheme. We store stock for brands based outside the UK at our warehouse in the Forest of Dean, Gloucestershire, fulfil their UK orders and handle their returns, so UK customers send items back to a UK address. Contact us for our registration number and a quote.
Further reading on GOV.UK: Fulfilment House Due Diligence Scheme and Carry out checks and keep records if you're approved for FHDDS.