Business Law: Steve Brown on how HMRC is clamping down on the e-commerce sector

Steve Brown of Gotelee Solicitors.
Picture: Roger Barcham

Steve Brown of Gotelee Solicitors. Picture: Roger Barcham - Credit: Archant

There is a sea change coming for all businesses operating in e-commerce fulfilment, and ignoring the effect of this new scheme is not an option for any business that wants to trade within the law.

The Fulfilment House Due Diligence Scheme is a new weapon in the war on tax avoidance – but many logistics and warehousing businesses may not even realise they are at risk.

A Government-commissioned report identifies an estimated £1.5bn black hole in the tax system due to, it says, goods sold through online platforms.

Businesses based on the Amazon/eBay model use online platforms to sell goods imported from outside the EU. They are stored here prior to being delivered, often in warehouses operated by third party logistics providers who pick, pack and despatch the goods.

These are the “fulfilment houses” on which HM Revenue & Customs has now trained its sights. New legislation will ensure that they can be held to account for the under-declaration of due duty which, HMRC says, is symptomatic of the e-commerce retail system, where savings of a few pence can mean the difference between success and failure in a crowded online marketplace.

Tackling this issue is welcome news for UK-based retailers who find it hard to compete with the prices on offer from virtual storefronts who often sell without paying VAT or import duty. But if your business provides a fulfilment service or stores goods from outside the EU on behalf of others, you may need to rethink your entire business model.

Fulfilment house businesses will be required by law to apply to register. They will need to prove they are “fit and proper”, demonstrate they can identify the origins of their clients and identify a VAT representative. They will also need to carry out due diligence checks on the suppliers involved and ensure that the goods match up with the import paperwork. Failure to comply can result in civil and criminal penalties, including up to seven years’ imprisonment.

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Registration must be completed prior to “D-Day” in April 2019. For information on how this scheme will affect your business and how you can prepare for what is coming, talk to our team of experts in the logistics field.

• Steve Brown is an importation and e-fulfilment adviser at Gotelee Solicitors. To contact him, call 01473 298106 or email

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