The Fulfilment House Due Diligence Scheme (FHDDS) intends to set out ‘fit and proper’ standards that fulfilment houses will need to meet in order to operate from 2018-19.
This consultation forms part of a package of measures announced in Budget 2016 aimed at tackling VAT loss from overseas businesses selling goods to UK customers via online marketplaces.
We highlight that this consultation document was published prior to the UK’s EU referendum on 23rd June 2016 and that it deals with financial estimates, industry sectors and supply chains that are likely to be significantly impacted by the UK exiting the EU.
This response is based upon UK and EU VAT law as it currently stands (June 2016) with the recognition that this is the beginning of a consultation process.
We support HMRC taking action to target abuse and non-compliance in this area and we recognise the resource constraints HMRC face in the current climate. However, our key concerns are that the proposed FHDDS has unintended consequences:
- it captures too many businesses through the use of non-precise definitions meaning that many businesses (including small and medium size ones) would be impacted unnecessarily, and
- we believe the primary targets should be those who seek to evade the tax and not those legitimate businesses who unwittingly deal with them.
The key question will be how to balance the effectiveness of such measures against the financial and administrative impact on legitimate business, particularly small and medium businesses.
We are of the view that the FHDDS as it is proposed is excessive and disproportionate.