FHDDS21000 - Policy and background: introduction to the scheme

The Government announced at Budget 2016 its intention to introduce a new online scheme for UK fulfilment houses from 2018, which would set out standards of due diligence and record keeping, and introduce penalties for non-compliance.

These measures were needed to combat non-compliance of VAT and customs duty through:

• abuse of reliefs to facilitate trade
• mis-declaring and undervaluing goods imported from outside the EU by some non-EU overseas suppliers
• onward sale within the UK with VAT not being accounted for

It is estimated that this form of non-compliance cost the UK Exchequer £1- £1.5 billion in VAT in 2016/17.

The Fulfilment House Due Diligence Scheme (‘the scheme’) is one part of a package of measures aimed at ensuring overseas suppliers pay the VAT and duty that are due and to level the playing field for businesses.

Note: The term used in the original legislation to refer to businesses affected by this scheme, was 'third country goods fulfilment businesses'. Following the UK's exit from the EU, this term was amended to 'imported goods fulfilment businesses'. For the purposes of this guidance this is shortened to the term ‘fulfilment businesses’.