© Mike Clegg |hmrc 37524894
© Mike Clegg

UK e-commerce logistics operators are to be hit by a wave of new regulations as tax authorities seek to claw back billions of unpaid duty.

Transport and logistics law specialist Howard Catherall has warned that companies involved in distributing e-commerce goods will be subject to the new Fulfilment House Due Diligence Scheme, which Her Majesty’s Revenue & Customs (HRMC) is set to bring into law next year.

This it is said will “place a heavy administrative burden and new obligations on any company or individual storing goods which are imported from outside the EU and being offered for sale online”.

“This is a completely new system of regulation and operators simply can’t afford to ignore it. The deadlines are set, the requirements are clear and there is no room for manoeuvre,” said Mr Catherall, a partner with Gotelee Solicitors.

The new scheme is designed to collect up to £1.5bn of unpaid VAT and customs duty that has been uncollected because fulfilment houses are being used by unscrupulous retailers based outside the EU.

“HMRC says there is systematic under-declaration of value and misdeclaration of goods, with no VAT being paid following the online sale,” Mr Catherall said.

The scheme is scheduled to go live next April, but e-commerce fulfilment firms already operating have to register with the HMRC by the end of June this year – and face a £500 fine for each month registration is late.

Additionally, Mr Catherall said, the definition of what constitutes a fulfilment business “goes much further than many might expect, ranging from a large-scale operation to a few spare shelves in a warehouse, to an individual channelling products through their spare bedroom or garage”.

And the scheme will require fulfilment operators to keep details of their customers, and if they know or have grounds to suspect that particular businesses or individuals are not meeting VAT and customs obligations, they will have to notify HMRC and not do any more business with that party.

Any breach of that would lead to a £3,000 penalty. Non-compliance could lead to a company going out of business.

A fulfilment house will be required to keep records of customer details, VAT information, descriptions of the types and quantities of goods being stored, import entry numbers and other information.

“That in itself is particularly onerous,” said Mr Catherall. “The operator has to do this for each and every individual or business based outside the EU which sells non-EU goods on line, at a time when they are stored in the UK warehouse. It is an incredible amount of work,”

This means fulfilment firms will have to check the contents of the boxes they handle to keep an accurate record of type and quantity, and that may have Trading Standards implications, as logistics operators could be held responsible for any goods despatched that don’t meet safety standards.

“If a shipment comes in stating that a carton contains 100 toasters, you can’t simply say you have the carton and that the import numbers match up. It requires someone to open the carton and check it does indeed contain toasters, and the right number of them.

“If a faulty toaster went out and subsequently injured someone, inevitably Trading Standards would follow the audit trail and ask: ‘you looked at the toasters – what did you do to satisfy yourself that they were safe?’,” he said.

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