FHDDS23000 - Policy and background: scope of the legislation

(Finance Act 2017, section 48)

A person carries on a fulfilment business if, by way of business if:

  • they store imported goods which are owned by a person, or on behalf of a person, who is not established in the UK
  • there has been no supply of goods in the UK for the purposes of the VAT Act 1994
  • the goods are being offered for sale in the UK or elsewhere.

Examples of fulfilment businesses:

A business receives imported goods and stores them on behalf of the owner who is based in America. When the goods are sold online, the American owner contacts the fulfilment business who then packs the goods and arranges delivery.

A wine merchant handles crates of wine from South Africa. The wine is offered for sale on the merchant’s own website but the goods are owned by the producer in South Africa until they are sold. The merchant arranges for the delivery of the wine when it has been sold online.

A UK warehouse receives goods manufactured in China which are advertised for sale online. The goods have been imported to France and then transported on to a UK warehouse. Even though the import was not directly to the UK, the goods fall within the scheme because they remain owned by a person outside the UK.

Exceptions

A person does not carry on a fulfilment business if:

  • they own the stored goods
  • the goods are not imported from outside the UK
  • their activities are incidental to the carriage of the goods.

Examples of businesses that do not fall within the scheme:

A logistics company picks up imported goods from the port but cannot deliver them until the following day so stores them overnight in a warehouse. This storage is incidental to the carriage of the goods.

An international chain of stores sells online and has a UK warehouse which stores, packs and delivers those orders of its own goods, some of which are imported from Asia. The goods are owned by the business therefore the business does not fall within the scheme.

Definition of a ‘person’

For the purposes of the legislation a ‘person’ includes:

  • an individual
  • a partnership
  • a limited liability partnership
  • a limited company
  • a public limited company
  • members of a group of companies within the meaning of the Companies Act 2006.

The above list is not exhaustive.

Definition of ‘imported goods’

Goods are ‘imported goods’ if they have been imported from a place outside the UK, within the meaning of imported goods in section 15 of the VATA 1994.